Here’s a tip I picked up from Matt Krantz of USA Today. Most mutual funds require a minimum initial investment. Even most Vanguard funds have a $3,000 minimum. When I started investing a long time ago, you could bypass the minimum investment requirement by agreeing to an automatic investment plan. Today, this option is often not available. So if you want to invest in a fund, but don’t have enough money to meet the initial investment requirement, turn to an online discount broker instead.
With discount brokers such as Scottrade, TradeKing, or OptionsXpress, you can invest in an Exchange Traded Fund (ETF) for about $5 a trade. For example, rather than buying Vanguard’s S&P 500 fund (VFINX), an investor could purchase shares of Vanguard’s Large Cap ETF (VV). And while you do have to pay a few dollars for each trade, the cost is no more than an expensive cup of coffee at Starbucks, and the expense ratios of ETFs are generally lower than the cost of the mutual fund counterparts.