Investing from scratch

If a lack of cash has kept you out of the market, here are three low-cost ways to get in

will lower the entry investment you’re required to pay for an IRA to $100. In this article, though, we’ll keep our sights on funds that lower the bar outside of IRAs.

That said, we called on Morningstar to run a screen on the 6,133 equity funds it follows to select the best that require a minimum initial investment of $250 or less if you agree to regular deductions from your savings or checking account. We looked for funds that don’t require you to pay load fees, and ranked the winners according to three-year average annualized returns (see chart, “Top Performers at a Low Price”).

One fund group that didn’t make our screen but is still worth mentioning is TAACREF (800-223-1200). Known for its management of teachers’ retirement funds, last year TIAA- CREF finally opened up retail funds catering to individual investors like you and me. As an institutional investor, TIAACREF has a very solid reputation. Furthermore, it takes only $250 to open up an account in any one of its stock mutual funds.

We’ve saved money market mutual funds for last. That’s in no way to detract from their importance. Most financial planners will tell you they’re a great way to set up a high-octane checking account where you’re actually paid a substantial amount of interest–5% or so, compared with the puny 2% or less that commercial banks extend you for your savings–to keep your money. And better still is the fact that money market mutual funds are liquid: you can draw on your principal by check if necessary.

If you’re starting from scratch, take heart that you can get into a money market mutual fund, like TIAACREF, for an initial investment of $250 or less. To gather up a list of general purpose money market funds that have low starting investments, we called on IBC, an Ashland, Massachusetts, firm that tracks the industry. We came up with five requiring $500 or less to get in (see chart, “Affordable Investment Options”). The winner: again TIAA-CREF’s Money Market Fund outranked the competition with a yield of 5.46%.

We may have listed them separately. Still the three- DSPs, low minimum mutual funds and low minimum money market mutual funds–can be combined to set up a solid foundation in a beginning portfolio or to shore up a group of stocks and mutual funds you might already own.

In the words of Crenshaw, who’s been a religious investor for 17 years: “If you’re in the market, you have a 50% chance of succeeding over the long term despite ups and downs; if you stay on the sidelines, you have a 100% chance of failure.”

Affordable Investment Options

The following funds let you in for a low initial investment, provided you invest regularly.









TIAA-CREF Money Market Fund



Van Kampen Reserve Fund



Nations Prime Fund



Pacific Horizon Prime Fund



GE Money Market Fund



* Seven-day compound interest

Source: “IBC’s Money Fund Report,” Ashland, Massachusetts (

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