Say I have just a few hundred dollars available which I want to invest long-term. I'm still saving money and putting it aside each paycheck, so if I wait 6 months I'll have a few hundred more to invest.
Is it worthwhile to start now with only a few hundred, or wait til I have a few thousand before investing it?
I'm looking at Vanguard, which seems to be pretty widely recommended.
The only "smallest amount" issue, as far as I know, is that some of these funds or their brokers may require a minimum initial investment to justify their effort in setting up the account. I believe my funds required that I start them with somewhere between one and five thousand dollars.
Other than that, gains (or loses, in a bad period) from a fund are directly proportional to the amount of money you have invested in that fund. It's just that 8% of $500 is a much less impressive absolute number that 8% of $500,000... But the way you get the $500,000 is a combination of ongoing deposits and compound interest over a decade or three.
Back when I first started investing several mutual fund companies waived the minimal investment if you agreed to sign up for auto draft. You might find one of those.
As others have said, even smallish fees will kind of kill you when you are investing small amounts. I know Fidelity does not have account fees, perhaps Vanguard does not as well. You might want to call and check on those two things.
Fidelity will allow you to purchase some ETFs and even some loaded funds with no fee. Its not an endorsement of one over the other, I actually have money with both.
Good work even humble beginnings can help pave the way to great things.
I agree with keshlam and would add that the problems arise where fixed charges apply with regards to your investment activities.
Hence, one drawback could be that there might be a minimum charge for running a depository account for holding your index fund at your bank / broker or a minimum transaction fee for buying and selling your index fund.
