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You're just starting out and have less than $5,000 to invest but would like to put what you have to work in the market.
You may have a tough time finding a brokerage that understands you won't always be a small investor. Many firms have boosted the minimum amount they require to open an account and the minimum balance you must maintain to avoid fees. Here's what you need to keep in mind:
- Minimums matter. Many brokerage firms won't let you open an account with less than $1,000, and some have minimums as high as $15,000. The minimum requirements for retirement accounts often are lower, however, so you may be able to open a traditional or Roth IRA with less. Ameritrade's $2,000 minimum is cut in half for IRAs, for example. Other brokers with low minimums include E*Trade ($1,000) and Harrisdirect (no minimum).
- Fees matter, too. Your returns easily can be wiped out by the fees many brokerages levy on small or lightly traded accounts. E*Trade charges $25 a quarter unless you keep $5,000 in the account or make two trades within six months. Harrisdirect's $15 quarterly charge is waived with three annual trades. Ameritrade waives its $15 quarterly fee if you keep $2,000 in the account. By contrast, two of the biggest discount brokers, Charles Schwab and Fidelity, typically require $50,000 and $30,000 balances, respectively, to waive fees. Before you commit your cash, ask about account or maintenance fees, IRA custodial fees, inactivity fees (if you don't make a minimum number of trades each year) and costs for common activities, such as transferring money or closing an account.
- Consider alternatives. Dividend-reinvestment plans, or DRIPs, allow you to invest as little as $10 a month, and many plans don't charge fees. ShareBuilder, meanwhile, allows small investors to purchase partial shares by combining orders and purchasing stocks in blocks. ShareBuilder has no account minimums and no maintenance fees.
What's not so important? Just about everything else. Unfortunately, your choices are limited until you build up a bigger stake.
Editor's note: Follow the links in the blue box to the left to read about other investing types and to return to the main article.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
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