How to start investing with under a $100 | VailDaily.com
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How to start investing with under a $100

Richard Loth

Remember when I wrote about “Dallas Morning News” financial columnist Scott Burns’ Latte Growth Fund? Impressed and inspired by the latte consumption he witnessed on a visit with his daughter to a local Starbucks, Burns came up with an ingenious concept for a growth stock mutual fund.He advocated kicking the habit and, instead, proposed investing the money being spent on lattes. Using reasonable financial assumptions, he projected that over a 42-year period, investing at a rate of about $100 a month from age 25 to age 67, you’d accumulate close to a million dollars.One of my younger readers thought this was pretty impressive. But, because of a very tight budget, she wondered how she could come up with the monthly requirement of $100. The point of Burns’ story about the not-so-fanciful Latte Growth Fund is that the way to build a retirement nest egg is to start early and invest regularly in a disciplined fashion. Generally, you need a minimum of $3,000 to open a mutual fund account, and small, repetitive stock trades are relatively expensive.So, if you’re on a really tight budget, and if $3,000 looks like $3 million here are some investing vehicles to consider under the $100 mark.• The USAA Cornerstone Strategy Fund (USCRX) is a large-cap blend stock mutual fund that will wave its $3,000 minimum if you invest $20 a month through an automatic investment plan.My good friend, Tom Larsen, who’s a self-described “money coach,” works with Primerica Financial Services here in the Vail Valley (471-5113). If automatically drafted out of a checking account, he will open investment accounts for you with as little as $25 per month. He rightly points out that all it takes is about 80 cents per day, “so for the change you hold in your pocket right now, you could open a Roth IRA.”• The National Association of Investors Corporation (NAIC) seems to be re-branding the organization with a more appropriate moniker and is now calling itself Better Investing. If you go to http://www.betterinvesting.org, you’ll see a reference to the MyStockFund (MSF) program, which allows investors to buy fractional shares of blue-chip stocks and exchange-traded funds. For example, you could invest $100 in Proctor & Gamble (PG) and obtain 1.75 shares at its current average trading price of $57 per share. The transaction commissions are very low. • The Direct Purchase Plan (DPP) and the Dividend Reinvestment Plan (DRIP) have been around for years. The latter direct investment vehicle requires you to already own stock to reinvest your dividend. The best source of information on this program is found in Chuck Carlson’s book, “Eight Steps to Seven Figures,” which is the definitive publication on DRIPs. Go to http://www.dripinvestor.com or call 1-800-233-5922 for more information.DPP programs allow investors to buy stock directly from the company, which is, in effect, what a DRIP program does with dividend payments. With a DPP, you can be a first-time buyer. With both the DPP and the DRIP, investors are dealing directly with companies without going through a broker. The Foliofn service (www.foliofn.org or call 888-973-7890) provides an investing platform for direct investing that requires no account or trading minimums. You can invest in one security or use Foliofn’s “Ready-to-Go Folios,” which are customizable baskets of securities representing a broad range of investment styles.Lastly, if you’re really serious about building an investment nest egg, you could go about it the old fashioned way – start saving $100 amounts in a bank money market account or a savings account. When you have accumulated a $1,000 balance, there are several mutual funds that serve investors at that level, especially if it is an IRA account.The Investing Wisely column is written by Richard Loth, managing principal of Mentor Investing and an independent registered investment adviser. Loth can be reached at 328-5591 or mentor@centurytel.net.Vail, Colorado


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