[gneiss]

I really would like to invest. I just subscribed to Kiplingers magazine. Can anyone give me advice on how I can invest with a little bit of money(500-1000)?

[ordinaryguy]

Regardless of how much or little you intend to invest, the following questions are worth thinking about. Once you have answers that are accurate for YOU at THIS POINT in your life, you can start to look at specific possibilities.

• What is your motive for investing?
• How long is your investment horizon?
• What kind of return on investment would you be satisfied with?
• How much risk are you willing to take, i.e., how bad would it be if your investment lost one-fourth, one-half or all of its value? What if you lost ten times more than you invested?

The last two points are of course related. The more likely an investment is to be profitable, the smaller the profit is certain to be. Finding the right spot on this continuum is the secret to anxiety-free investing.

[morgaine300]

I would ask instead why you have this little money to invest, because the answer to that could be important to answering ordinaryguy's questions. And you may not really know the answers to those.

For instance, are you young, want to just start investing and experimenting, and will be OK to lose all of it? i.e. can you consider this "play money"? Is the amount small cause you know you can afford to lose it? In which case, you are a lot more free to play around and just see what results.

Or is the amount small because you just don't have very much to invest right now, but you're still looking towards the future and want to get a jump-start? In that case, you'd more likely want to just play it safe right now and not lose the only savings you have. The more you have to invest, the more divisified you can get, which includes some higher-risk things. With only a little money, assuming it's all you've got and you can't afford to lose it, then you want to stay conservative. Assuming you want to go higher risk than CD's (most people would not refer to CD's as "investing" even though it is), then I might suggest just an S&P 500 index fund. With the market low, I think it's a good time to pick one up. If you want to be even more conservative, try treasury bonds or a high-grade bond fund. But I don't find a 500 index fund to be risky, because despite temporary ups and downs, overall the market tends to go up in the long-run. (Besides, sometimes those high-grade bond funds pay less than CDs.)

If you're investing seriously and not just wanting to experiment in the stock market, I suggest staying conservative with that little bit of money. About the only way you could invest that little, except getting a CD, is either a stock that's a low price, or with a fund, inside of an IRA. For example, if you go to ETrade and open an IRA brokerage account, I believe you can get the Dreyfus 500 Index fund for that little. If you go to some of the "regular" brokers like Vanguard, Fidelity, etc. they won't have even IRA with that low of a minimum. Though they will have a regular-deposit program for that little. i.e. you put in maybe as little as $100-500 now, and add like $50-100 every month authomatically.

Index funds are a dime a dozen, so it really comes down to minimums and fees. i.e. finding one with a low minimum with preferably no fees. And with a reputable company that isn't about to go under. I only mentioned the Dreyfus in particular cause it's fee-free through ETrade and has a $750 minimum inside an IRA.