Do you think that you need a fortune to get started? You’re wrong. Many fund companies have a $250 minimum investment requirement. Others with $2,500 or $10,000 minimum investments waive those requirements if you’re willing to invest $50 or $100 each month or even each quarter. Individual Retirement Accounts are another way to steer around high minimum investment requirements because many mutual fund companies allow you to start an IRA with $1,000.
(A few companies accept $250 as a minimum, but that is becoming more rare.) Almost all mutual funds offer this service to investors in an attempt to capture assets that the funds hope to hold on to for years — until the investors retire. Make sure, however, that you really can use an IRA and aren’t just looking for a way into a fund. You can’t tap the money until you reach age 59 1⁄2 without paying income taxes and a 10% penalty. If you’re investing for retirement, fine. If you’re investing to pay for your child’s college tuition or a beach house and expect to require the funds well before age 59 1⁄2, find a fund that fits your needs.
(A few companies accept $250 as a minimum, but that is becoming more rare.) Almost all mutual funds offer this service to investors in an attempt to capture assets that the funds hope to hold on to for years — until the investors retire. Make sure, however, that you really can use an IRA and aren’t just looking for a way into a fund. You can’t tap the money until you reach age 59 1⁄2 without paying income taxes and a 10% penalty. If you’re investing for retirement, fine. If you’re investing to pay for your child’s college tuition or a beach house and expect to require the funds well before age 59 1⁄2, find a fund that fits your needs.
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