& BARB RECOMMENDS LINK ROUND UP!
John responded to a recent article of mine in American Media Marketplace entitled Want to Get Rich From the Lottery? Start a Savings Plan Instead with this comment,
“(Saving) $50 a week for 52 weeks is $2,600, but it still wouldn’t meet the $3,000 minimum initial investment for the Vanguard Total Stock Market Index Fund.”
As a longtime cheerleader of Vanguad low cost Index funds, I WAS TROUBLED BY THAT COMMENT. I immediately called up Vanguard to confirm John’s comment. To my dismay, he is correct, not even with a commitment to automatic monthly contributions can you get around the $3,000 minimum initial investment. That’s way too high!
I frequently recommend getting started with investing, after taking care of these financial basics, by investing in a broad based mutual fund such as the Vanguard Total Stock Market Index Fund (VTSMX).
No more, although the advice still stands, the broad based United States Stock Index Mutual Fund has many clones. I stopped by Charles Schwab to check out their offering in this category.
The Schwab Total Stock Market Index Fund (SWTSX) is a better choice than the Vanguard Total Market Index Fund.
Schwab Total Stock Market Index Fund versus Vanguard Total Stock Market Index Fund
- Description: Seeks to track the total return of the Dow Jones U.S. Total Stock Market IndexSM, which includes all U.S. headquartered equity securities with readily available price data.
- Expense Ratio: Vanguard-0.19%; Schwab-0.09%
- Minimum Initial Investment: Vanguard-$3,000.00; Schwab-$100.00
Clearly, if you are just starting out, a fund with a small minimum required investment is an important consideration. Although a balanced portfolio should include a U.S.A. index fund, a broad based international fund, and some bond exposure, this article focuses solely on the U.S.A. index fund component.
Do not construe this article as a recommendation to buy or sell. Consult your own advisor for specific recommendations to fit your individual situation.
For a quick primer on investing download my FREE eBook 20 Minute Guide to Investing from the top right of this site.
Barb Recommends:
- Short and sweet at Yes I am Cheap; Answers to Common Personal Finance Questions.
- At Yakezie, Sam, the Financial Samurai wrote Believe You Will Succeed, what could be considered a Guide to Life in this article, you must read it!
- Life and My Finances does a wonderful job explaining an important financial concept, gross income. He even throws in some ways to increase it!
- Soldier of Finance has a beautiful website with great advice, and a video too. Get informed and entertained; You Don’t Have That Much Debt, Really?
- Free Personal Finance eBook, a great read by Carol in the Trenches
- One of the best articles on behavioral finance I’ve ever read at Money Crashers.
- Ever wonder about Buying a New vs. Used Car? Money Crashers offers some really good info.
- Ever consider getting a “debt free” college education. Read this guest article by Penny @ The Saved Quarter over at Get Rich Slowly.
- Should We Eliminate the US Postal Service? Ponder this question from Consumerism Commentary. I’ve thought about it myself.
- Want a good laugh? Head over to Millionaire Nurse Blog for some Money Saving Tips along with the humor.
- The College Investor asks, Why do Gas Prices Rise? I had to include this one as I’m a bit obsessed with inflation.
Barbara Friedberg Across the Blogosphere:
- Guest article; Eating Donuts Can Help You Stay on Budget at Len Penzo dot Com.
- Guest article; Want to Get Rich from the Lottery? Start a Savings Plan Instead, at Making Money Blog at American Media Marketplace.
- Interviewed by Tim at FAITH AND FINANCE.
- Totally Money Blog Carnival at Money Mamba
- Invest it Wisely
- Budgeting in the Fun Stuff
- Bucksome Boomer
If you like what you’re reading, sign up for my RSS feed and follow me on twitter so you get the word immediately.
Chime in please; what other investment companies have LOW INITIAL MINIMUM INVESTMENT THRESHOLDS?
image credit; the skateboarding maniac
When I saw the title in my RSS reader, I knew I had to click! Good, practical advice Barb! I don’t think one can put a 100 dollar bill to a better use!
You can buy the corresponding ETF though – VTI. Of course, there are commissions to consider but no minimum requirements.
Moneycone recently posted..Buffett Is Bullish On India- So Should You!
Hi Moneycone-Thanks for throwing in the ETF info. Many firms waive the commissions under certain circumstances!
You make a great point Barbara. Schwab has lowered their expenses on this fund over the years and I use it in some cases with clients with larger balances at Schwab.
One other point for 20 somethings, they should consider contributing as much as they can if they are covered by a retirement plan at work. This can be a great way to accumulate retirement savings in a “painless” fashion. Often there is a match component to boot.
Roger Wohlner recently posted..Selecting the Right Financial Advisor
I would invest it in any items you can find on eBay. I wouldn’t invest anything less than $1000 in the capital markets. Not worth it. Unless you will be putting in $100 each month consistently.
Jason recently posted..Diversification – An Investor’s Muscles
I think thats what Barb was saying, a $100/mo, and let it build up. That being said, my father discouraged me when I was 12 from investing in the market with $100 I had saved up, and it took me 15 years until I considered investing again…sometimes there are intrinsic values to investing as well.
I invest in VALIX, which is a dividend paying mutual fund. It has very nice return over the year, and I believe only $1,000 to buy in. Not only do you want to find a low cost, low barrier-to-entry fund, but also an online brokerage that wont charge you and arm and a leg to invest… Sharebuilder is great for investors who dont have a lot of money to put invest each month, but also dont want their $100 sitting idle for a year before they can invest.
MoneyIsTheRoot recently posted..Frugality…Can Your Health Afford It
@Roger-Great tip about workplace retirement accounts. Cannot be stated frequently enough.
@Jason-That’s absolutely the goal, to invest regularly and get started now, even if you can only start with $100!
Thanks for the visit!
@Money-Thank you for the additional information and resources. I guess your dad didn’t want you subjected to the volatility of the markets. I’m impressed that you wanted to begin at 12!
Thanks for including my link! I’m also very surprised that Vanguard doesn’t waive the minimum for automatic investing…not really like them.
Robert @ The College Investor recently posted..The Risks of Private Student Loans
Thanks for the mention, Barb! It would be great to have more choice up here north of the border.
Kevin@InvestItWisely recently posted..Arizona Mayor’s Failure To Avoid Bankruptcy Should Come As No Surprise
Thanks for the mention Barb. Not everyone appreciates my humor, you may be in a unique group-you and Penzo!
Consistency is quite boring when it comes to investing, but I think it is THE KEY!
Dr Dean recently posted..Paying NO Taxes- How
I am a big Vanguard fan! Surprised to see that the Schwab MMF has lower expense rates and minimums.
Mark recently posted..Why Rite Aid Is A Bad Investment
I am a Schwab client and I did not know lower expenses!
krantcents recently posted..2011 Quarterly Goals Update
@Robert-I was surprised to as I queried them specifically on that exact point.
@Kevin-I assume you have TD Ameritrade as TD BAnk is a Canadian operation. What are some of the investments and cos. that you like?
@Doc-Couldn’t agree more, slow and steady leads to investment success.
@Mark-I can’t tell you how surprised I was when the commenter from my article over at American Public Media Marketplace told me about the high minimums at VAnguard. In fact, I was shocked. It seemed inconsistent with their philosophy.
Krantcents-I didn’t know either, until I called and asked for the aforementioned commenter.
As mentioned, this is good practical advice. A regular monthly investment is a great habit to get you started. Increasing the amount as able by tracking spending to decrease monthly expenses as well as by investing raises would do a lot of individuals good.
optionsdude recently posted..Still Receiving Dividends
Hi Optionsdude-Great and concise list of smart money steps.
Schwab has a lot of great funds for $100 a month min. investments. Due to the competition, they have reduced their expense ration quite a bit. I love their credit card too. If someone needs other options,
Vanguard STAR fund (VGSTX) has minimum investment of $1000 (its a 60 stock/40 bond, not ideal but there it is).
All the fidelity freedom funds (target retirement funds) have a minimum of $2500. Fidelity IRAs can be opened with $200 a month as well.
Suba recently posted..Spousal IRA – Retirement savings for stay at home parent
Suba, Great information. I can’t thank you enough! How about a guest follow up post here? Seems like you have researched the topic quite a bit.
Barb,
I would love to do a follow up post. I will write the post this weekend and send it to you.
Thanks,Suba
Suba recently posted..Bug out bag – Emergency Preparedness kit essentials
I actually don’t know how to begin by investing $100, but since you made it clear I do. Thank you so much for this guide this actually helps to me.
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