Personal Finance Q & A

Mutual funds that let you invest for less

Q. Are there some mutual funds that can be bought into with as little as $100?

Name withheld, via e-mail

A. Alas, very few. The Berger Group offers a number of top-performing funds starting at $100 (800-333-1001). TIAA-CREF (800-223-1200) offers funds with a $250 minimum and Babson Funds (800-422-2766) has funds with a $500 minimum.

Many fund companies will let you start if you can afford monthly payments of $50. The payments must be kept up until you reach a designated minimum. For a list of low-cost funds, check out the Mutual Fund Education Alliance Web site: www.mfea.com

Q. My broker suggested setting up a discretionary account for me. What would that entail? Is it wise?

N.E., Seattle

A. A discretionary account gives a broker or account manager authority to buy or sell shares for you, without having to obtain your consent on each transaction.

But many brokerage houses try to contact the account holder first. "We make it a practice to try to touch base with our clients whenever we make an investment decision," says a broker with the Merrill Lynch office in Edison, N.J.

Discretionary agreements are quite common. Consumer experts recommend that you should enter into such an agreement only if you have complete trust in the broker and brokerage house.

Q. Stock funds seem to go up and down these days producing few dividends, (and low total returns.) So where's the compound interest everyone talks about when they say it's important to stay in the market for the long haul?

J.G., via e-mail

A No less an authority than Albert Einstein is often quoted as calling compound interest "the greatest mathematical discovery of all time."

Simply put, money left in an interest-earning account continues to multiply over time, despite market gyrations.

Unfortunately, if the market remains down for many years, there may be only small gains because of minimal compounding. That happened to many equity investors during the Great Depression.

But over far longer periods of time, as measured by research firm Ibbotson Associates in Chicago, stocks have outperformed alternative investments, including bonds and cash accounts, thanks to compounding.

Questions about finances? Write: Guy Halverson The Christian Science Monitor 500 Fifth Ave., Suite 1845 New York, NY 10110 E-mail: halversong@csps.com