by Janet Grischy

Created on: December 21, 2008

Invested wisely, small amounts of money can grow into an early retirement, a cozy home, or the funds to travel the world. The problem is finding places to invest the small bits of cash that can build a big future.

One option is Sharebuilder. This brokerage division of Ing Bank lets investors buy small amounts of almost any stock or fund, at very low fees. It is possible to make scheduled trades, arranged in advance to take place at stated times, at fees ranging from $1 a trade (if you make 20 per month) to $4 a trade for one trade. The idea is to buy small amounts of an asset at varying prices over time, so that the patient stockholder ends up paying a lower average price than if he or she jumped in all at once. Clients also have access to real time trades at under $10 each, and the ability to purchase options and mutual funds. These fees are low enough that a small investor can easily diversify at low cost.

Drips are another option. They're really called Dividend Reinvestment Programs, and the beauty of them is that with most of them, small investors are also allowed to make cash contributions as well as re-invest their dividends. Many companies have DRPs. There are famous names such as Exxon, Disney and McDonalds, but also many utilities and energy trusts that pay fairly high dividends. Investor's funds are pooled and purchases of the stock in question are made once a month or so. You can find out if the company you are interested in has such a program by searching the web for the company's website or by going to the First Share website, which has a list. You will often (not always) need to own at least one share to join a program, but this can be purchased from a discount broker, if you like.

There are plenty of discount brokers around, and the fees they now charge are much lower than they were in the past. A small account with a discount broker can be fun as well as educational; and you may even make money. Brokers to consider include E*Trade, TDAmeritrade, and Schwab, and there are many more.

Mutual funds are another possible choice. One choice is Pax
World Balanced (PAXWX), which has a varying allocation, but generally holds about 60% stocks and 40% bonds. The minimum amount to open an account with this fund is $250. CG Capital Markets (TLGUX) is a large cap growth fund that holds mostly equities. It has a minimum investment of $100. There are quite a few others.

Any time money is invested, it is paramount to keep good records. This way you'll know exactly how you are doing, and you will know your cost basis, for tax purposes, if you sell. Investing a small amount of money can be an entertaining challenge, and it's a good feeling to know you are building for tomorrow.

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