How to invest a 00 in an index mutual fund?
My pre-teen daughter saved up a 00 and I thought it might teach her how finances work if we invested it in a mutual fund. Specifically in an index fund like S&P 500 or some such.
The problem is that most funds I found have larger minimums than 00. Case and point, VFINX and VTSMX from Vanguard both have 00 as a minimum.
Will no one take my money?
What would you recommend I do with 00?
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I believe you can invest in Vanguard STAR with only 00 (VGSTX)
You have many alternatives to the funds you mentioned. It is actually very unusual for ETFs to have such high denominations.
Possible alternative: iShares IVV
What would you recommend I do with 00?
A diversified index fund is a great equity investment for the long run but might be considered "boring" by newcomers who think of equity markets as something more exciting. Maybe add a share or two, small ones, just to show the differences to the fund. This wouldn't be called wise investing but it certainly would have an educational effect.
Except if this money is all you saved for your daughter, then don't gamble any of it.
I found that the Target Date funds for Vanguard have a lower minimum, only ,000. They are spaced every 5 years from 2010 to 2060. They are available as: General Account, IRA, UGMA/UTMA and Education Saving Account.
As I recall, the Scottrade minimum is only 0. (By the way, Scottrade has a feature to automatically reinvest any dividends which the securities pay) Once you have an account, you can buy into an index fund.
SPY tracks the S&P 500. It is also currently paying nearly 2% in dividends.
You can shop for other alternatives here: seekingalpha.com/insight/etf_hub/etf_guide/selector/article/39431-core-building-blocks-large-mid-small-cap-us-etfs
There are several brokerages which have lower minimum deposits (often 0) and allow purchase of index ETFs. I won't name them to avoid advertising.
The best way to find out is to go to your bank, and ask to see a financial advisor. Then explain your difficulty to the advisor (who should caution you about the issues with investing such a small amount) and ask for advice on where to find a suitable broker.
Also, sometimes banks offer services where you can buy shares of a fund through your bank account. This is probably not "as good" as the brokerage (performance may be not as good, fees may come out higher), but especially for small amounts and for convenience, this may be easier. Again, you should inquire at your institution.
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