I’m a big fan of Vanguard’s low cost mutual funds but they aren’t particularly friendly to the young and new investor because they often have decently sized minimum investments. Most require $3,000 to start, though their STAR Fund requires a mere $1,000, which is a lot when you consider most people are looking to save a few hundred dollars a month. At $100 a month, it would take two and a half years to accrue the $3,000 needed (or 10 months for the STAR Fund), to open a Vanguard fund. While you could always put it in an online bank and earn a few percentage points while you waited, most people want to jump right in – fortunately there are many companies offering mutual funds with a low minimum investment.
To find one, I recommend using Morningstar’s Mutual Fund Screener. You can set the minimum initial purchase to less than $500, no load only, and expense ratios less than or equal to 1% – that will give you a result set of at least 200 (that’s the limit). For even more granularity, you can set the star rating to 5 and narrow it down to a mere 125 to choose from.
That will give you a head start on your mutual fund investing!