The (Very) Small Investor

Mon, Sep 26, 2011


Here’s what you need to keep in mind:

  • Minimums matter. Many brokerage firms won’t let you open an account with less than $1,000, and some have minimums as high as $15,000. The minimum requirements for retirement accounts often are lower, however, so you may be able to open a traditional or Roth IRA with less. But shop around. You can find a broker with a low or no minimum.
  • Fees matter, too. Your returns easily can be wiped out by the fees many brokerages levy on small or lightly traded accounts. Before you commit your cash, ask about account or maintenance fees, IRA custodial fees, inactivity fees (if you don’t make a minimum number of trades each year) and costs for common activities, such as transferring money or closing an account.
  • Consider alternatives. Dividend-reinvestment plans, or DRIPs, allow you to invest as little as $10 a month, and many plans don’t charge fees. Sharebuilder, for example, allows small investors to purchase partial shares by combining orders and purchasing stocks in blocks. ShareBuilder has no account minimums and no maintenance fees.

What’s not so important? Just about everything else.  Unfortunately, your choices are limited until you build up a bigger stake.

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