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As someone who plans to invest small, maybe ~$500/month. How do I go about building a diversified portfolio without getting hammered by commission fees from online brokerages. My thought is, if I want to avoid fees, I'll have to buy one stock at a time and that makes me highly undiversified. Or, say I want to commit $3000 of my annual $6000 to LinkedIn (to make the Gardners happy) -- how do I spread out the rest of my investments without getting crushed by fees.

Also, how do I factor in my 401k into my overall investment strategy?


One approach is to buy index funds (or their exchange-treaded equivalents) in a large mutual fund family like Vanguard. that way, you won't have to pay any commissions, Most of the Vanguard funds have a minimum of $3000, but I believe their Star Fund (VGSTX) has a minimum of only $1000. (After you get started in a fund, you will be considered to have met the minimum -- for future investment, you won't need to save up that amount again.)

You might also search out cheap (i.e., low expense ratio) funds, with lows minimums in Fidelity -- or a brokerage like Schwab or Scottrade.

That's a good way to get some good diversification right off the bat, but in order to meet the minimum, you might have to adjust your initial buys (e.g., save up first and the invest the minimum).

As for the 401(k), consider that as part of your portfolio. If you have an overall target asset allocation, include the 401(k) in it. Don't think that it too must have its own asset allocation. The 401(k) could be totally domestic, for example, although your asset allocation calls for some amout of foreign investment -- your foreign investments could be completely outside the 401(k).

culcha
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