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Greetings, zubrus, and welcome.

<<I am self-employed and want to start a SIMPLE IRA. This employer sponsored plan would let me invest up to $6000/year as a tax deferred retirement account. The plan uses salary reductions to fund the plan. I am planning to start with $500/month salary reduction. I would like to invest it in stocks.

My dilemma is that to invest this $500/month, I would be paying (assuming I had four stocks) $40-$130 a month in brokerage fees (that's 8-26% of my investment, $480-1560 a year and, $40,000-130,000 over 30 years assuming, I hope, 12% interest). And if I decided to sell one or more of the stocks, it would obviously be more. Plus the yearly account fee.

Do I just save up the whole year's salary reductions and then invest them at the end of the year, or do I give up on trading stocks in such an account and go with an inexpensive mutal fund account like Vanguard's. They charge just $10 a year for account maintenance. And my money could be invested monthly without further charges.>>

That's really going to be a question of how many trades you make and with what brokerage you hold your account. Around Fooldom, we believe the cost of maintaining and trading within your portfolio should not exceed 2.5% per year. Most discounters charge between $12.50 to $25.00 per trade. You talk about having four stocks. Well, in something like the Foolish Four, after the initial allocation is set up you could anticipate exchanging two stocks per year for a total of four trades consisting of two out and two in. Trading costs would be $50 to $100, and then means the portfolio size should be $2K to $4K.

If you expect to buy and hold four stocks each and every month, that's 48 trades per year for a cost of $600 to $1200 annually. That means you must have a starting portfolio of $24,000 to $48,000. In a SIMPLE, with something like the Foolish Four you could begin in the first year. With monthly trading of four stocks, though, it wouldn't make much sense until the fourth to eighth year.

So pick your poison. Nothing says you can't make your monthly deposits into the Vanguard 500 or into your broker's money market fund until the monies accumulate to the size where it makes sense to do some active trading. And nothing says that trading has to be done monthly, either. You -- and you alone -- must decide what makes sense in your situation.

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