Forum: money.stackexchange.com
Tags: <investing><mutual-funds><starting-out-investing><vanguard>
Title: How to invest a $1000 in an index mutual fund?
Question: My pre-teen daughter saved up a $1000 and I thought it might teach her how finances work if we invested it in a mutual fund.  Specifically in an index fund like S&P 500 or some such.  The problem is that most funds I found have larger minimums than $1000.  Case and point, VFINX and VTSMX from Vanguard both have $3000 as a minimum.  Will no one take my money?What would you recommend I do with $1000?

Answers:
sents: text: There are several brokerages which have lower minimum deposits (often $500) and allow purchase of index ETFs.
text: I won't name them to avoid advertising.
text: The best way to find out is to go to your bank, and ask to see a financial advisor.
text: Then explain your difficulty to the advisor (who should caution you about the issues with investing such a small amount) and ask for advice on where to find a suitable broker.
text: Also, sometimes banks offer services where you can buy shares of a fund through your bank account.
text: This is probably not "as good" as the brokerage (performance may be not as good, fees may come out higher), but especially for small amounts and for convenience, this may be easier.
text: Again, you should inquire at your institution.
answer_details: author: money.stackexchange.com/users/7131/Superbest
score: 3
sents: text: As I recall, the Scottrade minimum is only $500.
text: (By the way, Scottrade has a feature to automatically reinvest any dividends which the securities pay)
text: Once you have an account, you can buy into an index fund.
text: SPY tracks the S&P 500.
text: It is also currently paying nearly 2% in dividends.
text: You can shop for other alternatives here: http://seekingalpha.com/insight/etf_hub/etf_guide/selector/article/39431-core-building-blocks-large-mid-small-cap-us-etfs
answer_details: author: money.stackexchange.com/users/33145/Jack Swayze Sr
score: 2
sents: text: You have many alternatives to the funds you mentioned.
text: It is actually very unusual for ETFs to have such high denominations.
text: Possible alternative: iShares IVV
text: What would you recommend I do with $1000?
text: A diversified index fund is a great equity investment for the long run but might be considered "boring" by newcomers who think of equity markets as something more exciting.
text: Maybe add a share or two, small ones, just to show the differences to the fund.
text: This wouldn't be called wise investing but it certainly would have an educational effect.
text: Except if this money is all you saved for your daughter, then don't gamble any of it.
answer_details: author: money.stackexchange.com/users/34096/vic
score: 2
sents: text: I found that the Target Date funds for Vanguard have a lower minimum, only $1,000.
text: They are spaced every 5 years from 2010 to 2060.
text: They are available as: General Account, IRA, UGMA/UTMA and Education Saving Account.
answer_details: author: money.stackexchange.com/users/5414/mhoran_psprep
score: 2
sents: text: I believe you can invest in Vanguard STAR with only $1000 (VGSTX)
answer_details: author: money.stackexchange.com/users/34700/JaneQDoe
score: 1

Summary of the answers:
Ask a financial advisor at your bank. You can invest in Vanguard Star with $1000. A diversified  index fund is a great equity investment for the long term.
Probably the best idea is to go to your bank and speak to a financial advisor. There are several brokerages with minimum deposits often as low as $500 and which allow purchase of index ETFs. Target Date funds for Vanguard have a $1,000 minimum too and Vanguard STAR have a minimum of only $1000 (VGSTX). A diversified index fund is a great long-term equity investment, although it might be considered "boring" by some.