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This question has probably been asked before, but...

I started Roth IRAs for my wife and myself with the max $2000 contribution for '98. I placed her $2K in the Vanguard S&P 500 index fund. I want to invest my money in the FF, but don't know if it is too small an amount for that strategy to be effective. For instance, the commissions would eat %5 right off the top, and I might end up only owning 3-4 shares of certain higher priced stocks. Any thoughts?
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I started Roth IRAs for my wife and myself with the max $2000 contribution for '98. I placed her $2K in the Vanguard S&P 500 index fund. I want to invest my money in the FF, but don't know if it is too small an amount for that strategy to be effective. For instance, the commissions would eat %5 right off the top, and I might end up only owning 3-4 shares of certain higher priced stocks. Any thoughts?

The question of how to deal with the Foolish Four or related Beat the Dow strategies if you have only $2000 has been extensively discussed on the Dow Dividend Approach/Foolish 4 Board. You might want to read some of the discussion there, and think about the various options proposed.

Facing the same choice, I invested in one stock. After nine weeks and a 28.4% gain, I sold it. Now I'm looking at the same issue with $2569. I'll probably put it in something real conservative until I can add another $2000 to it next January. At that point, the Fool Four will be a real option.

Patzer
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Greetings, AirCal, and welcome.

I started Roth IRAs for my wife and myself with the max $2000 contribution for '98. I placed her $2K in the Vanguard S&P 500 index fund. I want to invest my money in the FF, but don't know if it is too small an amount for that strategy to be effective. For instance, the commissions would eat %5 right off the top, and I might end up only owning 3-4 shares of certain higher priced stocks. Any thoughts?

We believe that you should keep your overall costs to a maximum of 2.5% of your total portfolio, and the lower the better. In your case, the cost of trading exceeds that limit. Therefore, you're probably better off keeping that money in a good no-load index fund like Vanguard's until you achieve enough cash to start trading at the 2% to 2.5% level of costs.

Regards….Pixy


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AirCal:
<the commissions would eat %5 right off the top, and I might end up only owning 3-4 shares of certain higher priced stocks.>

First, how many shares you own is pretty much irrelevant to your situation. Otherwise, owning a single share of Berkshire Hathaway @ ~$77,000 wouldn't have any appeal at all.
Second, while 5% is a large percentage, it really boils down to next to nothing in actual dollar terms. Assuming $10-12 commissions, you're sweating the load over a 12-pack or two of decent beer. Do you lose sleep over buying an extra case of beer? If the FF appeals to you, jump in! Of course, there's always the UV2/RP2 option, which would cut your trading costs in half, with higher volatility (& returns, normally) as the price of those screens. Or you could buy 2 Keystone (or F90, etc.) stocks in a sort of souped-up Dozens. The possibilities are endless.

Chris
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>> Therefore, you're probably better off keeping that money in a good no-load index fund like Vanguard's until you achieve enough cash to start trading at the 2% to 2.5% level of costs. <<

Hmm, in January '99 I can drop in another $2K and start there. I might also consider the 2 stock approach someone else mentions. Part of the problem is I established the IRAs at Schwab, which has $30-$35 commisions as well as IRA fees, before finding out about brokers such as Waterhouse ($12). I've already moved a portion of my portfolio (my Fooling Around Money) to Waterhouse; is it difficult to move an IRA?

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s it difficult to move an IRA?


It's easy. Just go to the Waterhouse page and request a new Webbroker account for IRA. Fill it out, they do the rest.
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Invest in mutual funds. There are funds that invest in the DOW stocks and that is the best you can do now.
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