Wednesday, May 17, 2006

How to start Investing with only $100

I came across an article on MSN that offers a plan to start investing with a $100. The premise is to begin buying Exchange-Traded Funds (ETF) using Sharebuilder as your broker. I have never used Sharebuilder but the fact that they offer $4 trades makes me wonder why I am using E*Trade. The plan lays out five different ETFs and advises you to balance your portfolio between them by purchasing $100 worth of ONE fund per month. The idea of only purchasing one particular fund a month is to lower the comission costs. Start by setting specific allocation percentages for each fund you intend to buy and hold to them by using the new money you invest each month to balance your portfolio. For example if one of the funds took off and now holds a dominate percentage of your portfolio you will want to invest your new money into one of the funds that is furtherst behind your target allocation. It seems weird to invest in the underperforming fund but the author stresses DISCIPINE is the key to solid investing. I am going to try something similar to this idea. We'll see how it goes. Based on my track record I am going to guess poorly.

1 comment:

daysouffle said...

I just read this article. It's been two years since you posted this blog. Did you follow thru with the investments and how did it go?

I know it's probably not the best time to invest now, but I'd still like to know your opinion of this system of investing.

Thanks,

Day