Investing On A Budget

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Q: How do I start investing in a mutual fund if I have limited resources?
-J. Gardner
Covington, Georgia

A: Many people want to get into the investing game but find the minimum requirements for mutual funds daunting. The best way around these minimums is dollar cost averaging, a method of accumulating assets by setting aside a fixed amount of money in securities at set intervals.

Some brokerage firms or mutual fund companies will waive their minimums if you sign up for an automatic investment plan. You may even be able to set aside as little as $50 a month to purchase mutual funds. There are funds that require minimum initial investments of $250, but you can put small amounts into these until you reach that threshold (see “Investing From Scratch,” December 1998).

We recommend no-load funds, which you can purchase directly from a mutual fund company. Why? Load funds charge a broker’s fee. These fees-which can range from 4% to 8%-can eat into your returns (see “The Right Fund at the Right Price,” Moneywise, July 1999). A reminder, though: even no-loads levy some fees-management and maintenance charges are two-so you need to find that out up front.