No. of Recommendations: 1

BTW for a small account there may be other issues to consider. The biggest one being whether or not you can be fully invested. (Not everyone will want to be - at least not all the time. But if you're young, you probably want to be fully invested and yet your relatively small balance will work against that objective.)

Buying something like IVV at today's closing price of $170.21, gives you only 2 shares with $159.58 left over. (SCHX would let you buy 12 shares with $13.16 left over ... minus commissions.) Sure you can use that to help you buy that next block of shares. But you will almost never be able to put it all into a fund. Buying an open-ended fund (like a Vanguard mutual fund) fixes this issue at the price of a higher expense ratio.

Also what will you do with dividend payments? Again, you can roll them into your next purchase. But lots of brokers let you re-invest the dividends back into the stock issuing the dividend at no charge. Scottrade offers a quirky "FRIP" plan that isn't quite like other DRIP plans ... but it might work for you. TD Ameritrade and others offer the more traditional DRIP scheme. Most open-ended funds offer dividend reinvestment too.

Even now with ETFs being so accessible I often tell small-time, new investors to just open a mutual fund account and make regular contributions for a while. Soon you'll accumulate enough money to start making some serious investments at a brokerage. When that happens you can put your money into individual issues. (Of course if you're putting in $500/month you can probably just ignore these comments. Most of the people I tell this to are young and just starting out.)

BTW, some brokers offer a decent open-ended, NTF mutual fund selection. So if you think about going that route, you might do a mix and just put excess cash into a mutual fund at the brokerage until you're ready to make the next purchase...

Anyway, issues for you to consider...

- Joel
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