My pre-teen daughter saved up a $1000 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 $1000. Case and point, VFINX and VTSMX from Vanguard both have $3000 as a minimum.

Will no one take my money? What would you recommend I do with $1000?

  • Keep in mind that if you invest that money into an instrument without a guaranteed return, the lesson you teach your daughter could turn out very costly. "Don't gamble with money you can't afford to lose" is a valuable lesson but probably not as valuable as your daughter's love, trust and happiness. – Lilienthal Nov 4 '15 at 14:32
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    Your question title prevents me from posting this as an answer (and it's more suited to the Parenting SE anyway) but as your main goal is educational I'd suggest adding that $1000 to one of the funds you are already investing in and creating or modifying reports for your daughter's "investment" as learning material. Whether it makes sense to teach this to a pre-teen is another question for the Parenting site. – Lilienthal Nov 4 '15 at 14:37
  • I'd recommend just putting in a savings bank account, it's great for them to be able to see their money going up every day(month in some cases). There's no risk at all involved in this. and even a few cents is likely enough for a child since it probably took them a considerable amount of time to accumulate $1k. Alternatively pay the other $2k for them as a kind of reward/incentive for them since they are responsible with their money. – Aequitas Jan 25 '16 at 4:33
  • If you're not inside an IRA, you'll want your index fund packaged as an Exchange Traded Fund (ETF). These fold dividends back into the ETF's value, which makes it rise faster and avoids tax paperwork on the dividends. For VFINX, the ETF equivalent is VOO. For VTSMX it's VTI. Clever names... Anyway since you buy them on the stock market, all you need is any brokerage account that'll let you open with $1000. – Harper - Reinstate Monica Jun 21 '16 at 22:19

As I recall, the Scottrade minimum is only $500. (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: http://seekingalpha.com/insight/etf_hub/etf_guide/selector/article/39431-core-building-blocks-large-mid-small-cap-us-etfs

  • By the way, here is a chart that is quite useful for evaluating SPY. The SPY:$SPX shows how well SPY Tracks the S&P 500 index. So SPYSPY does just a tiny bit better than the index. But the line is arrow straight, showing that it tracks the index very well stockcharts.com/h-sc/… – Jack Swayze Sr Nov 4 '15 at 11:12
  • The expense ratio for SPY is a bit lower than the other funds mentioned, as well. Generally, lower expense ratio means more return for the shareholders. – chili555 Nov 4 '15 at 13:25

There are several brokerages which have lower minimum deposits (often $500) 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.


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 $1000?

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 $1,000. They are spaced every 5 years from 2010 to 2060. They are available as: General Account, IRA, UGMA/UTMA and Education Saving Account.


I believe you can invest in Vanguard STAR with only $1000 (VGSTX)

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