Starting to Invest

IF YOU DIDN’T HAVE at least a few thousand dollars, it used to be tough to get started as an investor. Not anymore. Here are some low-rent ways to ease into the markets:

Fund that 401(k). If you’re in your 20s, there’s a decent chance your first foray into investing will be through your employer’s retirement plan. That’s a great place to start, and not just because of the tax benefits and any matching employer contribution. You’ll likely find the plan includes a limited list of mutual funds, which makes the choice more manageable, and you don’t have to worry about meeting some required minimum initial investment.

Look for low-minimum funds. There’s no minimum investment required to buy some of Charles Schwab‘s mutual funds. Schwab’s fund lineup includes index funds, fundamentally weighted index funds and target-date retirement funds. Similarly, Fidelity Investments has no required minimum investment for its funds, which include a large number of index funds, including a few with no annual expenses.

For $1,000, you can purchase one of T. Rowe Price Group’s target-date retirement funds in an individual retirement account, while $1,000 will allow you to buy a Vanguard Group target-date fund in either an IRA or a regular taxable account. If you have relatively limited savings, you won’t be able to buy many investments, so you should probably stick with mutual funds that give you broad market exposure—which is what you get with a target-date fund.

Buy exchange-traded funds. Instead of mutual funds, you could open a brokerage account and purchase ETFs. Some of the discount brokerage firms have no required minimum to open an account and many offer commission-free trading.

Save for the house. To amass money for a future house down payment while also accumulating a pool of emergency money, try shoveling cash into a savings account or certificates of deposit. You won’t earn high returns. But given that you can’t afford to take much risk when pursuing short-term goals, a high return was never in the cards. Instead, your regular savings will be the key driver of the account’s growth.

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