I am planning to invest a tiny amount of money each month (less than $100) in some way. (I hope what begins as a small amount is more a confidence/skill builder [mainly for the benefit of the wife - I've had a virtual portfolio that I've done well with over the last few years] that I can begin to put a much more serious effort into growing).

I already have an IRA as well as a 401k to which I'm contributing a maximum. Other than home mortgage my wife and I have no debt.

The money I would invest would mainly be experimental which is why it's so small an amount to begin with.

My question is on the best strategy to grow such a small amount of money assuming I can reasonably assume I have $100/month for the next 20 years?

My initial thoughts on strategy are to start with basic savings until the $500 mark and thereafter use Mutual Funds or Index funds to try to build it to a point where I can buy/sell individual stocks and/or other financial instruments.


In terms of building the initial investment using some kind of mutual fund, I'd suggest you see my answer to this similar question https://money.stackexchange.com/questions/9943/cheapest-or-free-online-broker-for-beginner

For buying individual stocks later, you could look at sharebuilder, or a low cost broker, however most of them charge between $5-$7 per trade, and if you are doing small dollar value trades then that can really really eat into things if you try to trade a lot.

  • Thanks for your help Chuck. I think I may start with just plain old savings via something like SmartyPig.com to build critical mass over the next few years and then having enough to get something like a Vanguard account. – David in Dakota Aug 1 '11 at 20:34
  • Frankly I think there's a lot to be said for doing something like a low cost broker that has access to ETF's (like a total stock market) that they let you buy commission free, that seems a great very low cost way to put stuff in a little at a time, buying another share of the ETF whenever the balance allows. You also get dollar cost averaging that way. – Chuck van der Linden Aug 1 '11 at 21:06

Compound interest is your friend. For such a low amount of cash, just pop it into savings accounts or deposits. When you reach about 1.500€ buy one very defensive stock that pays high dividends. With deposits, you don't risk anything, with one stock, you can lose 100% of the investment. That's why it's important to buy defensive stock (food, pharma, ...).

Every time you hit 1.500€ after, buy another stock until you have about 10 different stock in different sectors, in different countries. Then buy more stock of the ones you have in portfolio.

You're own strategy is pretty good also.

  • You say compound interest but then suggest keeping money in a savings account earning a fraction of a percent. A mutual fund where you actually earn enough to compound is a much better idea. – Kevin Oct 13 '17 at 16:11
  • The current interest rate is too low (negative savings when taking inflation into account). However, the costs of getting into funds (we're talking about < €1.500,-) means you will lose money as well. You will lose either way, @Kevin – GUI Junkie Oct 18 '17 at 9:52

(For people looking at this question many years later...)

Schwab and Fidelity offer a wide selection of commission-free ETFs. You need an initial purchase amount, though, of (when last I checked at Schwab) $1,000.

  • I'm partial to vanguard myself. No brokerage fees trading their funds, and generally low expense ratios. For a wider variety of trading, I also use Robin Hood, which has no brokerage fees at all. – Kevin Oct 13 '17 at 16:08

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