Fund or broker with very low minimum?

[Onward]

I'm trying to help a friend's daughter get started, and she has only a small amount to invest.

Can anyone recommend a fund family or broker with a very low minimum (say, $100) to open an account, and a structure that won't kill her with fees or commissions if she regularly invests small amounts?

I'm looking at ShareBuilder, but I find it confusing.

 

[LOL!]

I am not sure that $100 is even worth it, but that said here are some possiblities:

Fidelity: My daughter opened a Roth IRA at Fidelity with under $500 and has not contributed any more. It is no fee. She was able to purchase a few shares of an exchanged-traded fund or ETF with zero commission and has let it sit without further additions for quite a while.

Schwab: I purchased $100 of the Schwab Total Stock Market index fund (ticker SWTSX) without any fees or commissions. My broker was not Schwab, but one might be able to open an IRA account online for free at Schwab and do this. It looks like subsequent additions must be at least $100 as well. Dividends are automatically reinvested for free which is a good thing.

TDAmeritrade has no-fee IRAs as well. They have no commissions on many ETFs that are suitable for anyone. I do not know what their minimum is, but you can find out with a phone call or on the web.

Sharebuilder is expensive, so I would not use it ever.

Many places have the $25 a month or $50 a month plan, but I guess that isn't going to be the situation here.

 

[Coach]

She could open a Schwab Bank "Investor" checking account, which has a zero minimum balance and she'll get a zero minimum balance Schwab brokerage account with it. It's a good checking account, too.

Coach

 

[Onward]

I'll check out Schwab and SWTSX. Thanks.

 

[brewer12345]

I can think of a couple options. SWBGX is a Schwab balanced fund with very low minimums. I use this for my kids' custodial accounts.

Another alternative is the Vanguard STAR fund. This is another all in one/balanced fund with low minimums.

 

[bamsphd]

I'm trying to help a friend's daughter get started, and she has only a small amount to invest.

Can anyone recommend a fund family or broker with a very low minimum (say, $100) to open an account, and a structure that won't kill her with fees or commissions if she regularly invests small amounts?

The unfortunate reality is that the places I would want her to be in 10 years, because they offer good prices on diversified investments, can not support $100 accounts, because they offer good prices. The other reality is that once she has had an account somewhere for a number of years, she will be less and less likely to move her account. So I hate to send her to someplace with high expense ratios, but low minimums. I also hate to recommend the classic buy one share of a DRIP stock that allows additional contributions, because I don't think someone with a $100 portfolio should be investing in individual stocks.

One alternative is US Savings Bonds until she has enough money to meet the minimums for an open ended fund.

Another alternative is the Vanguard STAR fund. This is another all in one/balanced fund with low minimums.

Currently Vanguard STAR fund has a $1,000 minimum, a 0.37% expense ratio, and waives their annual $20 fee if you access your accounts via the web. So going with Savings Bonds until she has enough for the minimum investment could make sense.

The best other option I can suggest unfortunately costs $20 per year. She could open a Vanguard Brokerage account, and use it to purchase and hold Vanguard ETFs commission free. That is an investment she might never outgrow, which would be very tax efficient, have very low expense ratios and wide diversification. Perhaps an adult could gift her the $20/year until she has real money?

 

[Onward]

The VG brokerage acct is a possibility. So far the best option seems to be the Schwab checking + brokerage acct combo, with no minimums, no fees, and commission-free purchases of Schwab index ETFs.

The next step is to get her to follow through and open and fund the account. I am struggling to keep her from spending all her savings, and future income for some time, on a set of fake boobs.

 

[LOL!]

The SWTSX has a very low expense ratio. While I am a big fan of ETFs, the reality with ETFs is that you need to buy an integral number of shares, so if you only have $100, you end up with one share of a $53 ETF and $47 sitting earning 0.05% in a cash sweep account. The beauty of a mutual fund is that one can buy fractional shares and get the entire $100 invested.

 

[youbet]

with ETFs is that you need to buy an integral number of shares, .

Is that true? I've purchased fractional shares of two different ETF's through Schwab.

 

[DblDoc]

Is that true? I've purchased fractional shares of two different ETF's through Schwab.

I believe that is at the discretion of your brokerage. Fractional shares cannot be traded on the exchanges but they can allocate fractional shares to clients.

DD

 

[bamsphd]

I'm trying to help a friend's daughter get started, and she has only a small amount to invest.

Is this friend's daughter 18+ or a minor?

The Schwab website says about Schwab Bank High Yield Investor Checking

Who’s it for? US Residents aged 18 and over.

Though they only require $100 for custodial accounts.

 

[foxfirev5]

There shouldn't need to be an urgent need to open a mutual fund account. I would encourage saving up the $1000 for Vanguard STAR or $3000 for one of the index funds. Put $20 /week in the cookie jar and next fall she'll be able to solidly start out with low cost funds that she can grow with no hassle.

 

[Onward]

Is this friend's daughter 18+ or a minor?

She's 21 going on 17.

Put $20 /week in the cookie jar

I'm almost sure she would raid the cookie jar before the account ever got opened. I guess she could keep her contributions in a bank acct until she accumulated the $1000 minimum, but she would be more tempted to blow it since there would be no securities to sell. The whole process needs to be kept as simple as possible, so she doesn't lose interest or get frustrated, and to some extent she needs to be protected from herself, till she matures some.

 

[brewer12345]

She's 21 going on 17.



I'm almost sure she would raid the cookie jar before the account ever got opened. I guess she could keep her contributions in a bank acct until she accumulated the $1000 minimum, but she would be more tempted to blow it since there would be no securities to sell. The whole process needs to be kept as simple as possible, so she doesn't lose interest or get frustrated, and to some extent she needs to be protected from herself, till she matures some.

How about a CD at an online bank (Ally, ING, etc.)? It will be out of sight, out of mind, plus there is a surender penalty to cash it in early.

 

[LOL!]

Is that true? I've purchased fractional shares of two different ETF's through Schwab.

It may be that you automatically re-invested dividends from an ETF which would be the same as purchase of fractional shares. I would be very curious if you entered an order via the web site to purchase a fractional number of shares.

 

[bamsphd]

She's 21 going on 17.

I'm almost sure she would raid the cookie jar before the account ever got opened.

Use savings bonds or even better a Roth IRA.