Expert: Paul Henneman - 2/14/2006

Question
I have about $500 I would like to spend on a graduation (high school) gift for my sister. I would like to use it to open an investment account. What are some options that I have.  

Answer
Kemmy,
    Thank you for your question! I think that really the best option for you would be to purchase a mutual fund with the $500 for your sister. There are 'index funds' that are designed to trade an overall segment of the market, called an index. The S&P500 is perhaps the most stable and most appropriate for you to use for this.
    The main problem is that your sister will likely not have much knowledge in actively managing an investment. So you need something that can grow over time without needing and activity or work on the part of your sister. For this the index mutual fund is perfect. You can buy a mutual fund on most major discount brokerage services, I like www.scottrade.com and www.foliofn.com  Mutual funds have a ticker symbol, a series of letters, just like stocks. To research exactly which index mutual fund you want, I would suggest visiting www.morningstar.com. Another good site to research this is www.motleyfool.com.  Here is a link to an excellent article on the motley fool site, they will probably ask you to sign up with your email address to access this but it is free:
http://www.fool.com/mutualfunds/indexfunds/indexfunds01.htm

The Vanguard S&P 500 fund is perhaps the first one to look at after you get your feet wet with the above article.

I hope this helps! Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com
www.VEInstitutional.com
www.VEReports.com