Beginner Investing/Investing


Hello Paul,

I am a twenty five year old who has just put his fist 150.00 into investing. I like the idea of long term investing and am trying to make my portfolio eighty percent long term holds and twenty percent active trades.

As far as long term, I have been told by numerous sources close to me and involved in investing for many years that index funds are the best bet however at this point I do not have the 2,000.00 which is the minimum for index funds. I am wondering your thoughts on ETFs. I like the concept of them however was told they aren't smart to purchase unless you plan a minimum of ten shares each purchase.


Bottom line is I have about 200 a month to invest and want to do so intelligently. In the future I will have more but would like to get a solid start.

Thank you very much.

  Thank you for your question! Yes, ETF's are in my opinion an excellent way to invest in general indexes over time. They have very low fees (usually lower than most mutual funds), and are very liquid in that you can sell them and convert back to cash quickly, like a stock.
  The problem with what you outline is the small amount of each trade. Even with ETF's, you will have to pay a trading fee each time you make a purchase. For example, if you invest $200 a month and buy an index ETF that tracks for example the S&P500 index (the most common for this type of investment), then you will pay usually $7 to $10 each month for the trade.  This would be about 5% of your investment, so your ETF would have to rise about 5% just to offset the cost of the trade. This is not ideal.
  However, if you invest $200 each month and trade once ever 5 months for example, then you would be making a trade with $1,000, and you would be paying about 1% in trading costs. Thats better. This protects you a bit if the markets drop, as you would not be losing a larger percentage in trading costs as well as the drop in value of your investments.

Just a thought, but yes I agree that ETF's are what you should be looking at.
I hope this helps, please do not hesitate to reply if I can offer anything additional,

Paul Henneman
ValuEngine Inc

Beginner Investing

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Paul Henneman


I can answer any questions on investment strategies. Specifically, my expertise lies in long term investment strategies designed to beat market performance while reducing risk. Not get rich quick schemes, but solid investing strategies. DO NOT SEND ME YOUR HOME WORK QUESTIONS! Over one half of the questions I receive are clearly students in finance or economic classes asking for answers to their homework questions. Most of these come from India. I won't answer them, do your own work. However, I welcome all investors trying to negotiate how to invest in stocks, mutual funds, ETF's, and other investments.


15 years in a leadership role at a financial research company. We sell research to institutions such as Wells Fargo, Fidelity, Thomson Reuters, Bloomberg, Bank of NY, Scotia Bank, and others.

Florida International University, University of Florida

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