On our Discount Brokerages discussion board the other day, I ran across an interesting conversation. New Fool thefoolhimself started it by asking: "I am really eager to choose an online discount broker and start investing, but I am still really young and really poor."
He also offered some other details. For starters, "As a recent college grad I am drowning in student loans and credit debt, but I have a positive outlook and a plan in place that will allow me to pay them off quickly." That's excellent. If any of his debt carried steep interest rates, I'd be advising him to pay that off before investing. After all, why earn perhaps 6% or 12% in the stock market, only to pay 22% or more to a credit card company?
But back to his question. The good news is that lots of brokerages don't require big upfront investments. He'd balked at Fidelity Investments' $2,500 minimum. I dug around and found that they'll waive that for their Roth IRA accounts, if you sign up for automatic monthly transfers of at least $200 from your bank account. Then there are less demanding options, like Scottrade and E*Trade (Nasdaq: ETFC), featured in our Broker Center. The former sports an account minimum of a mere $500, and the latter just $1,000. E*Trade also carries no minimum for retirement accounts, while TD Ameritrade (Nasdaq: AMTD) requires just $1,000 for them.
On the other hand, $500 isn't enough to build a diversified portfolio of individual stocks. If you have only small amounts to invest, you might do better starting out with mutual funds. Our Motley Fool Champion Funds newsletter can introduce you to some winners. (Its picks are beating their respective benchmark indexes by 22 percentage points.) The Janus Contrarian (JSVAX) fund, for example, sports a five-year annual average return of 21%, and recently included Amgen (Nasdaq: AMGN), J.C. Penney (NYSE: JCP), Weyerhaeuser (NYSE: WY), and St. Joe Company (NYSE: JOE) among its top holdings.
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