If you are new to investing and/or on a budget, get started in the investing game by way of an automatic investment plan with a major no-load fund family. For example, you can set things up so that $200 per month (or less) automatically flows into a mutual fund from your checking account.
There is no obligation to continue your contributions for a specific period of time, but each fund company (or family of funds) has its own minimum investment requirements. For example, you might be permitted to invest as little as $100 per month, if you first open an account by investing at least $3000 into the mutual fund that you plan to make monthly payments into.
Here’s an example of how to invest $200 per month, as an investor willing to accept moderate risk to get long-term growth. We’ll call this new investor Torie.
Torie’s father suggested that she call his favorite fund company, and to also check out their web site for information. He assured her that they were one of the two largest mutual fund companies in the USA, and that all of their funds were no-load (no sales charges).
After talking to a service representative, she decided to make an initial investment of $1000, and to have $200 per month automatically flowing from her checking account to a balanced fund. She was now in their automatic investment plan, and could stop the $200 monthly investment anytime she wanted to.
Torie decided to make her mutual fund account a Roth IRA, since she wanted to invest for retirement, and liked the fact that she could watch her money grow tax-free. She could also make changes within her account in the future without income-tax consequences.
Plus, this fund appealed to her. It was a balanced fund that invests in other funds within the same fund family. About 60% to 70% of her money would be invested in stocks with the rest in bonds and safer short-term reserves.
Torie liked the idea of investing on her own and saving money by not paying commission or sales charges. Her next challenge was to learn more about stocks, bonds and mutual funds. After all, it was time for her to really learn how to invest. Someday she hoped to have a sizable amount of money to manage, and she was determined to really put it to work so it would carry her through retirement.