Investing, just a couple bucks at a time

Lots of people saving in a piggy bank

Tess Vigeland: Alright so as we've already discussed, this was one of those weeks on Wall Street where you would have been better off. I dunno, cleaning out your septic tank than watching CNBC. But even on this crazy week, we are going to talk about investing in the stock market. Before you roll your eyes and write to us about how you don't have enough money to invest, this one is actually for you.

I'm joined by Christine Benz, director of personal finance at Morningstar. Hi Christine.

Christine Benz: Tess, great to be here.

Vigeland: We hear from listeners pretty much every day about living paycheck-to-paycheck. Is there any amount too small to start investing?

Benz: I don't think so. And the fact is, by starting small and socking away small sums at regular intervals, that's a really good way to invest. Because you're ensuring that you're buying some stock or bonds when the prices are relatively low and maybe some when they're higher. But over time, you'll get a nice averaging effect.

Vigeland: But when we talk about too small, there has to be a baseline for what you need to buy a stock or a total market fund. Is that $5, is it $10, is it $50?

Benz: Well, I think that the $50-$100 threshold, you really start having some better investment choices. So if you're looking at an exchange-traded fund, so it's a diversified basket of securities, but it trades on an exchange throughout the day, if you're looking at an exchange-traded fund like Vanguard Total Stock Market ETF. The share price is currently about $60. You can also buy Schwab Index Funds for about $100. So if you have $50 to $100, you're in good shape with some decent investment choices.

Vigeland: Then where is the best place to start, particularly if this is something new for you. So not only do you have a lot to invest, but you really don't have a lot of basic knowledge about where to put that money. What is the best way to get started?

Benz: So the key thing is to look for diversification. I really like the idea of getting started with a broad market index fund. But it doesn't have to be one that's U.S.-centric. So, you can buy a foreign stock market index fund. If you buy a fund like that, you're essentially saying, "I want exposure to the whole world." And I think that that is a really sensible way to begin investing.

Vigeland: But you also have to bear in mind that there are going to be fees for having that account as well, right? And that depends on what company you are using.

Benz: Right. There may be account maintenance fees that you'll pay year-in and year-out. You may also pay trading commissions. And that's one thing you really want to be careful about. Any commissions you pay are going to take a big bite out of your returns. So you want to try to find a platform -- and thankfully, there are several right now -- where you can make those trades commission-free or without paying any sales charges at all.

Vigeland: You know, long-term unemployment is an issue for a lot of people in this country. Given that and given what that means in terms of disruption to their income, how do they think about maybe recalibrating their portfolios in order to meet their living needs?

Benz: That's a great point. To me that probably argues for making sure that you have part of your retirement assets in very safe and steady securities. You don't want to have to raid that retirement account, but if you do, in a pinch, you won't be taking it out of stocks, which could be at a low ebb and might need time to rebound. You want to take it out of those safe and stable investments.

Vigeland: But you know, when we're talking about investing and folks who don't have a couple of nickels to rub together, you probably shouldn't be doing it, for example, if you have debt.

Benz: Right. If you have debt, by far the best return on your money is going to be in retiring that debt, particularly if it's high-interest rate credit card debt.

Vigeland: Christine Benz is director of personal finance at Morningstar, an independent investment research firm in Chicago. Thanks so much for coming in.

Benz: Thanks, great being here.

Vigeland: And for more tips for a tight budget, check out the advice from the folks at Wisebread on our Makin' Money blog.

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