Investments can actually begin by investing just $100. True there are plenty of stocks available for less than a penny. However, investing $100 in stocks may not always provide investors the diversity that mutual funds assure. Moreover, risks associated with penny stocks are higher. On the other hand, there are low-cost mutual funds with decent returns where investors can invest just 100 bucks. These funds are even offered by prominent firms such as BlackRock, Inc. (BLK - Free Report) and The Charles Schwab Corporation (SCHW - Free Report) . Mutual funds are thus an affordable option for diversity apart from being a safer investment bet.
Investing in Mutual Funds
Mutual funds are great options for investors looking for a relatively less risky way to earn at least more than what fixed income instruments offer. Money from individuals and even organizations are invested in stocks, bonds, or other assets covering diverse industries globally.
One of the benefits of mutual funds is that it allows a small investor to invest in a basket of securities at one go. Investors need not worry about investing a large chunk in securities separately. Moreover, these are less risky than any individual asset class as underperformance of a security gets mitigated by outperformance of others in the portfolio. In addition to the asset diversification, mutual funds also provide liquidity, economies of scale and are professionally managed.
Automatic Investment Program
While investments can begin with just 100 bucks, many fund families make provision for the automatic investment program. Firms, including The Charles Schwab Corporation (SCHW - Free Report) or Janus Capital Group, Inc. , have this facility. Under the program, investors need to contribute money every month.
In fact, USAA First Start Growth lets investors open an account without investing a single penny if they chose the AIP option. However, the fund requires investors to shell out $50 a month under the AIP. This fund currently carries a Zacks Mutual Fund Rank #1 (Strong Buy). The fund has returned 14.2% over the last 3 years. Moreover, not carrying either a front or deferred sales load makes this fund more attractive.
A $100 investment cannot make an investor rich. This can only be to get someone started with investments. So the actual returns come when an investor decides to invest a certain amount of money for a considerable time. So, this can double up as a great retirement plan as well.
3 Best Bets Now
A $100 bet will make more sense when bulk of that amount is invested and no charges are paid from it. Funds that carry no sales load and have relative low expense ratio should be preferred. It is also important to look at the performance track record.
Also, the following funds hold either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) as we expect the funds to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund.
Schwab Health Care (SWHFX - Free Report) seeks capital appreciation over the long run. It invests the majority of its assets in companies related to the healthcare sector. A majority of the investment is made in domestic companies by using Schwab Equity Rating. A maximum of 25% of its assets may also be invested in foreign countries.
The minimum initial investment for the fund is $100. SWHFX has an annual expense ratio of 0.82%, significantly lower than the category average of 1.39%. Also, the fund carries no sales load.
The fund currently carries a Zacks Mutual Fund Rank #2 (Buy) and has returned 20.5% over the last 5 years.
Schwab Small-Cap Equity (SWSCX - Free Report) seeks capital appreciation over the long term. The fund uses Schwab Equity Ratings to invest most of its assets in small-cap companies. The fund may also invest all of its assets in financial instruments such as cash, money market instruments, repurchase agreements and other short-term obligations for cautionary measures during difficult economic or market conditions.
The minimum initial investment for the fund is $100. SWSCX has an annual expense ratio of 1.10%, significantly lower than the category average of 1.26%. Also, the fund carries no sales load.
The fund currently carries a Zacks Mutual Fund Rank #1 (Strong Buy) and has returned 16.7% over the last 5 years.
BlackRock Basic Value R (MRBVX - Free Report) is a “feeder” fund that invests 100% of its assets in Master Basic Value LLC. Master LLC invests in undervalued equities and primarily in domestic common stocks. Companies having market capital over $5 billion are selected for investments.
The minimum initial investment for the fund is $100. Also, the fund offers a minimum initial AIP of $100 and then min subsequent investment, AIP, of $50. MRBVX has an annual expense ratio of 1.12%, significantly lower than the category average of 1.13%. Also, the fund carries no sales load.
The fund currently carries a Zacks Mutual Fund Rank #1 (Strong Buy) and has returned 13.5% over the last 5 years.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank in our Mutual Fund Center.