Q: What's the least amount I can invest in the Standard & Poor's 500 index?
A: When it comes to investing, you have to have money to make money. But just getting started can be a big hurdle for many individual investors.
Thanks, though, to new investment products and online investing, you don't need much cash, $200 or less, to get started investing in a broad basket of stocks. Investing in the 500 large U.S. stocks in the S&P 500 index can also be a good place to start.
Investors who have less money to start with must deal not only with minimum deposits, but also with fees. Even if a brokerage charged just $15 for a trade, smaller investors could get chewed up in a hurry.
Both of these hurdles to smaller investors, account minimums and commissions, though, continue to fade away. With a little effort, you can find a brokerage that offers accounts with no minimum balances that will allow you to invest in the S&P 500 with no or low trading fees.
If you're dead set on investing in the S&P 500, consider opening an account with a deep discount brokerage such as TradeKing, ING Sharebuilder or Zecco and buy Vanguard's S&P 500 exchange traded fund, with the stock symbol VOO. These low-cost brokerages allow investors to open accounts with no minimum deposit. You could then buy one share of the Vanguard S&P 500 exchange traded fund for the current market price, currently about $60, plus a roughly $5 commission. So you can own the S&P 500 for less than $70. Keep in mind, with this approach you'll need to pay the commission each time you invest more money. The $5-a-share commissions can add up over time. You will also have to pay the commission when you sell.
Another approach might be to sign up with a brokerage that has no account minimums and also offers free trading in an S&P 500 ETF. TD Ameritrade, for instance, has no account minimum. You can open an account and then buy and sell shares of the iShares S&P 500, with the symbol IVV, and pay no commission. The downside: The ETF has a higher per-share price of about $130. Don't worry. You're still paying the same valuation for the S&P 500, it's just that the per-share price is higher. With this technique, you have a higher entry price but won't have to worry about the ongoing commissions.
Other brokerages offer solutions but have their own downsides. Scottrade offers an ETF that's like the S&P 500, called the Focus Morningstar Large Cap Index ETF, with the symbol FLG, with a lower per-share price of $25. However, Scottrade has a minimum deposit of $500. Similarly, Schwab offers an S&P 500-like ETF that is about $30 a share, but Schwab has an initial deposit of $1,000. Some brokerages, including Schwab, may waive the initial deposit if you open other accounts, such as a checking account.
