November 03, 2009


Over time, most of the news for beginning investors hasn't been good news ... Seemingly, one company after another has raised minimum investment requirements as many companies don't want to deal with "those people." I recall about a decade ago as a Professor at Iowa State a large mutual fund company that allowed new investors to open an account with a one-time investment of $100 or an automatic investment of $25 every three months. A short while later they changed their policy and required $50/month automatically (currently one of the lowest options) or a one-time investment of $1500. When I called them to find out why they changed their policy, their answer was understandable -- they had a bunch of accounts with $100 in them. As a financial educator at the time working largely with college students, I recall the frustration as there were very few options that were viable for a college student or new grad wanting to get started with investing. Since then, the viable options have become even fewer.

There are currently a small handful of no-load fund companies that will allow a beginning investor to start with no up front money if they set up automatic investments of $50/month. T. Rowe Price, TIAA-CREF, and USAA (available to the military) are the biggest.

I was excited to learn a few months back about Schwab. Charles Schwab is a company that has been around a long time but had never excited me (until now) ... Schwab offers several low cost index funds. An account can be opened with $100. Subseqent investments can be made for as little as $1 (literally a buck - the minimum has been tested). Hearing that did excite me. I was then excited further to see the news release yesterday where they have lauched their own set of ETFs (exchange traded funds -- some homework for you if you don't know what they are) with the lowest expense ratios in the industry and became available starting today (11/3/09) with ZERO COMMISSIONS (half of them rolled out today and the other half will roll out next month). The first ETFs available commission-free. FINALLY SOME GOOD NEWS FOR BEGINNING INVESTORS!! Kudos to a financial company taking some consumer-friendly steps.

PS - If you're curious, no, I didn't go from Iowa State University to Schwab ... I'm actually currently a government contractor providing financial education to the military. Charles can thank me later for the free advertisement, although I have no problem sharing information when it's better than the competition.