Stock or mutual fund purchase with only $200?

powernoodle

powernoodle

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Jul 21, 2004
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Here's the deal. The Powernoodle boys, ages 10 and 14, have $200 each in an eTrade account. One account for each boy. The problem is that I can't find any investment vehicle at eTrade that will let them in the door with $200. eTrade customer service was friendly, but not helpful. Many funds have a $1,000 minimum, but we are not ready to fork over another $1600 to get this show on the road.

Anyone know of anything in the stock, fund or ETF genre at eTrade that lets you in the door with $200?

Do they get out of eTrade and maybe each buy $200 of stock directly from Walmart or XYZ corp or whoever?

thanks :thumbup:
 
Morningstar lists all mutual funds and you can sort by minimum investment. The kids should learn about Morningstar anyway. But, you're gonna find that there are only a few options below $250 and only maybe 15 below $500.
 
If the money's in an IRA or ESA account, most mutual funds have lower minimum initial investment levels for those account types. The kids probably aren't eligible for an IRA since they won't have earned income at those ages. But anyone can have an ESA account for college savings.

ETFs and CEFs (Exchange Traded Funds and Closed End Funds) are traded on the open market and have no minimums beyond the cost of a single share + commission.

I'm not pushing Firstrade as being the best or cheapest brokerage, but I think they're the most friendly towards very small and new investors. They can set you up with accounts (ESA, IRA, or regular) for free with no account minimums, and they have a small selection of ETFs they provide with zero commission.

There are some open-end mutual funds with minimum purchases at $200 or less, but probably not unless it's purchased within an IRA/ESA account.

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Amana Funds is one example to look at. Minimum initial investment is normally $250, but only $100 for IRA/ESA accounts. AMANX, AMAGX.
 
There's no reason they couldn't buy individual stocks with their $200. But investing in individual stocks is more risky than mutual funds, and the commissions (even at a discount brokerage) would take a large chunk out of any potential gains.

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I'd also point out that the ESA plans work similarly as a Roth IRA, tax-wise; there's no tax break for investing, but you don't pay tax on any of the gains or distributions.

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Many mutual fund companies have a very low minimum start-up if you invest with them directly (not through a brokerage) and set up an automatic monthly deposit. Don't know if that's something you'd be interested in.
 
How about, teaching them to start their own business instead of giving the control of THEIR money to someone else?

The only ones I know that make money in stocks are the ones taking transaction fees.

Pull the cash out, buy a lawnmower & have their earnings based on the work they do.

or

Even better have them own the lawnmower & pay other kids to do the sweat.



I know that's not the answer to your question, but seriously, have them read and play the games
for Rich Dad Poor Dad.
I wish I read it 30 years earlier & put it into practice.
 
12345678910 said:
How about, teaching them to start their own business instead of giving the control of THEIR money to someone else?
Click to expand...

This suggestion has merit. BUT, part of the problem -- which we're seeing right exemplified by the "occupy Wall Street" rabble -- is that far, far too many young people today have absolutely NO IDEA how business works, how corporations work, how banks work, and how markets work, how free enterprise works. And we always fear -- and often blame -- what we don't understand.

When I was in fifth grade, our teacher gave us each $1000 at the beginning of the year. Oh, of course it wasn't real money; it was virtual money. And we could invest in stocks, bonds, or commodities. Of course, our teacher acted as our broker. We paid brokerage fees and everything. This was, of course, well before the Internet, so we had Morningstar and the Vanguard Guides in our classroom. Every morning, a group of fifth graders gathered eagerly around the Wall Street Journal... can you believe that? And by the end of the year we had something which schools usually try to avoid these days: there were definite winners and definite losers. And the winners knew why they won and the losers knew why they'd lost... and the losers knew why the winners had won... and the winners knew why the losers had lost. We all knew -- all of use fifth, soon to be sixth, graders -- knew how stocks and bonds and commodities and mutual funds worked and how markets worked and how free enterprise worked. Several students left fifth grade with an ambition to occupy Wall Street... in a somewhat more conventional -- and profitable -- manner. Oh, and as far as I know, only one of us ended up in federal prison for securities fraud.
 
Even people who have their own businesses have need of savings and/or investing accounts for their retirement, kids' educations, emergency savings, etc., etc.

I imagine that people who own successful businesses are more likely to maximize 529 / IRA / 410k / ESA and other account deposits. If for no other reason, the tax breaks can be substantial.

---------------

Interested in learning more about Rich Dad Poor Dad, I did some quick checking, including a chapter-by-chapter summary, including this from Chapter 4 (bold is mine):

Chapter 4: Mind Your Own Business
The author continues his discussion on building assets. To him, real assets are anything with value – stocks, bonds, mutual funds, income-producing real estate, notes, royalties from intellectual property, etc.
This chapter also reveals the author’s investment preferences: real estate and stocks.
Click to expand...

Also thought this was interesting. Not to start a fight or anything since I haven't read the book.
http://www.smh.com.au/articles/2004/06/03/1086203560484.html?from=storyrhs
http://www.johntreed.com/Kiyosaki.html
 
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Invest it in Altria group ticker MO and reinvest the dividends. By the time they are reaching retirement age they will have a ton of money.
 
Bob W said:
Even people who have their own businesses have need of savings and/or investing accounts for their retirement, kids' educations, emergency savings, etc., etc.

I imagine that people who own successful businesses are more likely to maximize 529 / IRA / 410k / ESA and other account deposits. If for no other reason, the tax breaks can be substantial.

---------------

Interested in learning more about Rich Dad Poor Dad, I did some quick checking, including a chapter-by-chapter summary, including this from Chapter 4 (bold is mine):



Also thought this was interesting. Not to start a fight or anything since I haven't read the book.
http://www.smh.com.au/articles/2004/06/03/1086203560484.html?from=storyrhs
http://www.johntreed.com/Kiyosaki.html
Click to expand...



Those are valid quotes, but you missed the areas that you didn't bold.
income-producing real estate, notes, royalties from intellectual property, etc.

Of the people that I KNOW
they have made the most $ from owning a business they control directly, or started and sold.
or, income producing real estate.


The book shows different types of incomes.

The ones people are most famalier with are working for money
(but you can only work so hard or long)
or "investing"
Most bonds pay a pittance, maybe cover the inflation rate, maybe not.

Mutual funds are popular they are taking % management fees whether they go up or not.

Most "financial advisers" are mutual fund salesman, taking % off what you have in with them.
That is not independent transparent advice.

The reason "The wealthy Barber" book was so popular, mutual fund salesman bought it by the caseload and handed it out for free.

I know that I had more or less 100k invested with respected advisor's & lost at least 20% over 15 years.
Had I bought assets like rental real estate, I would have made money , not lost it.


There are 10's of thousands of traders working on stocks, bonds and such daily.
They have the most sophisticated software & BILLIONS of $ to play with.
Even they don't make $ every day.

The only guarantee in trading is pulling $ from transaction and management fees.




There is valid criticism from that site on the book, but he's also using the hits he gets off a rich dad search to sell his own book

I like that the book starts you to think about other streams of income and how to get them.
90% of the books out there, push the mutual fund buy and hold.
 
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Thanks for the discussion, guys. Some good points have been made, especially as they relate to developing an entrepreneurial spirit at a young age. Books like The Millionaire Next Door are good examples.

Each of my sons has decided to kick in $800, to bring each pile up to $1000. This represents most of what they have earned, saved and been gifted over the years. Having $1000 to play with will give them a few more fund selections. What I'm probably after is maybe some kind of S&P 500 Index fund with a $1000 minimum entry. But I'm still looking and open to options. Thanks again.
 
The two may be able to partner and then they will have two important things: $2000 which gives them more options, a partner that they have to work with. They would even be smart to solicit other partners for their venture; perhaps Dad would like to bring a couple of grand to the partnership? That would allow the money to be spread over several investments thus spreading risk, a good lesson.
 
Bob W said:
ETFs and CEFs (Exchange Traded Funds and Closed End Funds) are traded on the open market and have no minimums beyond the cost of a single share + commission.
Click to expand...

An ETF is sounding better. Any downside other than the commission? And do you get dividend reinvestment with an ETF, and how does that work?

Gollnick said:
The two may be able to partner
Click to expand...

That sounds good in the abstract, but as a practical matter they do not have a high regard for sibling partnerships. :)

thanks
 
Gollnick said:
This suggestion has merit. BUT, part of the problem -- which we're seeing right exemplified by the "occupy Wall Street" rabble -- is that far, far too many young people today have absolutely NO IDEA how business works, how corporations work, how banks work, and how markets work, how free enterprise works. And we always fear -- and often blame -- what we don't understand.

When I was in fifth grade, our teacher gave us each $1000 at the beginning of the year. Oh, of course it wasn't real money; it was virtual money. And we could invest in stocks, bonds, or commodities. Of course, our teacher acted as our broker. We paid brokerage fees and everything. This was, of course, well before the Internet, so we had Morningstar and the Vanguard Guides in our classroom. Every morning, a group of fifth graders gathered eagerly around the Wall Street Journal... can you believe that? And by the end of the year we had something which schools usually try to avoid these days: there were definite winners and definite losers. And the winners knew why they won and the losers knew why they'd lost... and the losers knew why the winners had won... and the winners knew why the losers had lost. We all knew -- all of use fifth, soon to be sixth, graders -- knew how stocks and bonds and commodities and mutual funds worked and how markets worked and how free enterprise worked. Several students left fifth grade with an ambition to occupy Wall Street... in a somewhat more conventional -- and profitable -- manner. Oh, and as far as I know, only one of us ended up in federal prison for securities fraud.
Click to expand...

That's why you're teaching them now while they are ten and fourteen.

The same principle as teaching them how to play the stock lottery, but more concrete and understandable where their decisions affect their outcomes.
 
Heck, since somebody dug it up anyways...

I'd say take the $200 and buy a 1/10 ounce gold eagle or similar piece of precious metal.
 
Hey Powernoodle, you got something worked out by now I presume?

powernoodle said:
An ETF is sounding better. Any downside other than the commission? And do you get dividend reinvestment with an ETF, and how does that work?
Click to expand...

Most brokerages now have a list of selected ETFs that they offer commission-free. The quality of and number of ETFs offered under such promotional programs vary by brokerage, so it pays to shop around.

ETF dividends work the same as stock dividends, and that varies by brokerage. My brokerage offers free automatic dividend reinvestment, and they offer fractional shares in case the dividend isn't enough to buy a full share. Or you can choose to accumulate the dividend payments as cash.
 
CombatGrappler said:
Heck, since somebody dug it up anyways...

I'd say take the $200 and buy a 1/10 ounce gold eagle or similar piece of precious metal.
Click to expand...

One of the things we learned in fifth-grade was, "buy low, sell high." Gold is at historic highs right now. Not the best time to be buying.

Besides, according to Bloomberg just a week or so ago, the number of short positions in gold is also at a historic high right now; the experts are betting on gold to fall.
 
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