Best Mutual Funds With Low Minimums

April 23rd, 2008 · No Comments · Subscribe to this feed

Investing can be hard when you’re young and don’t have much money to invest. Sure, companies like T Rowe Price will let you invest as little as $50 up front in an IRA if you promise to invest an additional $50 per month deducted automatically from your checking account, and if you can afford to do that, I highly recommend going that route, but what if you don’t have even $50 to spare at the end of the month? What if you have a few hundred dollars you received as a gift you want to invest as a lump sum? Here is a list of some of the best mutual funds with low minimums.

If You Have $1,000 To Invest

Vanguard STAR Fund (VGSTX)
This extraordinarily diversified Vanguard fund is really all you need if you decide to go the one-fund route (and if you’re investing on a budget, you probably should). This actively-managed fund of funds have an exceptionally low expense ratio of 0.32%; however, it’s a bit on the conservative side for a young investor with approximately 40% of its assets in bonds. Still, that may turn out to be a blessing in disguise since a healthy bond allocation has helped keep volatility under wraps. A solidly above-average choice for anybody looking for a one-stop fund solution.

Oakmark Select (OAKLX)
This one is not for the faint of heart. Unlike Vanguard Star, Oakmark Select is not a diversified mutual fund. It invests in a concentrated portfolio of just 20 or so stocks, mostly mid and large capitalization US stocks. Because of this, you should expect extreme bouts of volatility and be prepared to accept large losses from time to time, even during periods when most other mutual funds seem to be doing well. That said, Oakmark Selects star manager Bill Nygren has posted enviable returns over the long term and investors should do well with this fund going forward, if they can stand the volatility.

If You Have $500 To Invest

Homestead Stock Index (HSTIX)
With an expense ratio of 0.64%, this is definitely not the cheapest nor the best S&P 500 index fund, however, it does have a low minimum and on a relative basis, 0.64% is still barely more than half as expensive as the average large-cap blend fund. It’s cheap enough that it should still handily beat most actively-managed funds although it will obviously lag behind cheap S&P 500 index funds by a small margin. You will definitely want to trade this fund in for one of the bigger, cheaper S&P 500 index funds after you’ve saved up a few thousand dollars but in the meantime, this fund will serve you well.

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