You may have the impression that you need to be wealthy to start an investment portfolio. Some mutual funds do require a large initial investment, but other funds will accept a low opening balance, although you may be required to make regular contributions. Potentially rewarding investment opportunities in mutual funds are available, even if you are limited to investing $25 a month.
A number of mutual fund families and brokers offer products with a monthly investment of $25 as of 2011, including TIAA CREF, GoalMine, Van Kampen, Alger, Putnam Investments and AARP. In most cases, you must set up an automatic payment of at least $25 per month into the fund.
Carefully research the mutual funds you are considering as investments to ascertain whether you are required to make a minimum initial investment in addition to a monthly minimum. In some cases, the initial investment could be as much as $500 or more. If you don't have this kind of money to invest, these funds are beyond your reach.
Beware of Fees
When you are investing small amounts, you have to be particularly careful of the transaction costs and management fees charged by mutual funds. If you invest $25 a month, your total yearly principal will be $300. Some mutual funds charge fees that will wipe out any earnings and perhaps some of your principal as well. Research the fee structure and do the math to make sure you'll actually make money on your investment.
You might want to deposit $25 a month automatically into a savings account and then invest the $300 principal at the end of the year as a lump sum into a mutual fund. This may help to minimize transaction fees and give you a wider choice of funds. Index funds are generally a good bet for beginning investors.