Author Topic: Investing tiny sums possible?  (Read 6273 times)

koralcem

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Investing tiny sums possible?
« on: December 07, 2014, 08:43:37 PM »
I mentioned the math of saving even one Starbucks trip per week to my wife, and she was surprised about the possible amount saved over 20 or 30 years. I'm glad she was excited about getting those savings. But her next request surprised me: Could we do exactly the aforementioned exercise? Meaning we make less starbucks trips, but every time we consciously eliminate one, we put the money we would've spent there into an account, invest it, and watch how much it actually becomes over the years. I mentioned that funds have certain minimums, so it wouldn't be possible to invest something like $20 on its own. We could roll it in with our other investments, keep track of the return over the years, and manually do the math to see what the initial $20 became. But she was more interested in pooling just the starbucks savings, and having a single, simple spot to check to see what's become of it. Is such a thing possible? Can one somehow invest something like $20 in an account on its own?

Ricky

  • Pencil Stache
  • ****
  • Posts: 842
Re: Investing tiny sums possible?
« Reply #1 on: December 07, 2014, 08:49:19 PM »
Yes, of course, any brokerage. You can buy any amount.

But, for small amounts, no fee would be the only thing that makes sense. LOYAL3 is fee free. $10 increments. Limited selection though.

And of course Vanguard funds and ETFs are free of transaction costs.

sol

  • Walrus Stache
  • *******
  • Posts: 8448
  • Age: 42
  • Location: Pacific Northwest
Re: Investing tiny sums possible?
« Reply #2 on: December 07, 2014, 08:50:44 PM »
You can transfer the money to a separate checking account, and then set up either manual or automatic recurring transfers in any amount from that account to a mutual fund. 

The problem there is that mutual funds typically have minimum investments of $1k to $3k each.  ETFs have no minimum investment amount, but you can only buy whole shares and the cheapest ones are like $40 per share.

I'd make the individual small transfers to a new checking account, then once per month sweep the balance to investments.  Not quite as good, but close.

coffeehound

  • 5 O'Clock Shadow
  • *
  • Posts: 88
Re: Investing tiny sums possible?
« Reply #3 on: December 07, 2014, 09:09:41 PM »
I started out investing $25/month, so, yes, it can be done.  One thought - the brokerage I use attaches a money market account (terrible interest rate) to my investing account.  I can save money in the money market account until I have enough to purchase whole shares of my ETFs....... easy way to track those weekly/monthly savings with a transfer from the ol' checking account as often as I wish!

glorkvorn

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: Investing tiny sums possible?
« Reply #4 on: December 07, 2014, 09:44:06 PM »
I think it would be cool if there was a way to do this without paying ridiculous fees.  Like those ATMs they have for bitcoins, you could go in and buy a share of stock with the money you saved.  It could be a powerful psychological motivator to get people to save.

Kwill

  • Handlebar Stache
  • *****
  • Posts: 1251
Re: Investing tiny sums possible?
« Reply #5 on: December 07, 2014, 10:09:44 PM »
I mentioned that funds have certain minimums, so it wouldn't be possible to invest something like $20 on its own. We could roll it in with our other investments, keep track of the return over the years, and manually do the math to see what the initial $20 became. But she was more interested in pooling just the starbucks savings, and having a single, simple spot to check to see what's become of it. Is such a thing possible? Can one somehow invest something like $20 in an account on its own?
What if you did Lending Club? You can add or withdraw funds in any amount, and with the note trading platform, you can buy notes around $15. I started a little Lending Club experiment last summer. It's kind of time-consuming to deal with a small amount because the dividends aren't big enough to reinvest, but for this purpose, it might be fun because you could be more involved and decide exactly what to do with very small amounts.

Rage

  • Stubble
  • **
  • Posts: 147
  • Location: SoLoNoCo (aka Longmont)
  • Eat the Horses
Re: Investing tiny sums possible?
« Reply #6 on: December 07, 2014, 11:58:26 PM »
I have something rather similar to what OP is describing.  I've been selling everything I own that I don't need for the last 6 months and recording proceeds in a spreadsheet - some items I made as little as $2.85 on (Gears of War for XBox360 - sold on half.com).  Every time I accumulate enough to buy a share of VOO, I transfer the amount to my Vanguard account, and record in the spreadsheet the corresponding fraction of a share allocated to each item I sold.  It doesn't work out perfectly, but it's interesting anyway.  I even track the dividends allocated to each fractional share. 

It's extremely tedious and ridiculous, but totally awesome to see that the Dell Power Supply that I made $34.11 on (after eBay and Paypal fees and shipping) is now worth $36.76 including dividends (though not the reinvestment of those dividends - now that would be complicated - not to mention dividends on those reinvestments - it's recursive!)

All you need to start a Vanguard account is a $3K minimum.  Once you have that though you can create separate "sub accounts" - not sure what they're called - with no minimums so you could certainly create one for your Starbucks savings.   There are no fees for buying Vanguard ETFs in your Vanguard brokerage account.

I might recommend using VYM (~$70/share - Vanguard High Dividend Yield ETF - an index ETF) instead of VOO(~$190/share - Vanguard 500 Index Fund ETF) for this little experiment if you want to be able to buy shares more quickly, but whatever.

JoanOfSnark

  • 5 O'Clock Shadow
  • *
  • Posts: 68
  • Location: Berlin, Germany
Re: Investing tiny sums possible?
« Reply #7 on: December 08, 2014, 01:40:17 AM »
I got tripped up by the 3k minimum account balance on Vanguard (I have about half that in USD right now), so I'm doing Betterment until I hit that. Once I'm up to 3K, I plan to move it over to Vanguard and do ETFs or index funds.

YoungInvestor

  • Bristles
  • ***
  • Posts: 396
Re: Investing tiny sums possible?
« Reply #8 on: December 08, 2014, 06:17:20 AM »
I think some brokerages (I think Questrade may be one) have no fees when buying ETFs.

This could solve your problem.

Quote
It's extremely tedious and ridiculous, but totally awesome to see that the Dell Power Supply that I made $34.11 on (after eBay and Paypal fees and shipping) is now worth $36.76 including dividends (though not the reinvestment of those dividends - now that would be complicated - not to mention dividends on those reinvestments - it's recursive!)

You could simply give each purchase a certain percentage of the global account/position value that gets adjusted every time you invest more or withdraw some. It seems much easier to track to me and would take care of your (fairly major over the years) problem.

auntie_betty

  • Bristles
  • ***
  • Posts: 297
Re: Investing tiny sums possible?
« Reply #9 on: December 08, 2014, 06:40:14 AM »


It's extremely tedious and ridiculous, but totally awesome to see that the Dell Power Supply that I made $34.11 on (after eBay and Paypal fees and shipping) is now worth $36.76 including dividends (though not the reinvestment of those dividends - now that would be complicated - not to mention dividends on those reinvestments - it's recursive!)



Aw go on - that would be great to see!!!!

Rage

  • Stubble
  • **
  • Posts: 147
  • Location: SoLoNoCo (aka Longmont)
  • Eat the Horses
Re: Investing tiny sums possible?
« Reply #10 on: December 08, 2014, 10:36:55 AM »


Quote
It's extremely tedious and ridiculous, but totally awesome to see that the Dell Power Supply that I made $34.11 on (after eBay and Paypal fees and shipping) is now worth $36.76 including dividends (though not the reinvestment of those dividends - now that would be complicated - not to mention dividends on those reinvestments - it's recursive!)

You could simply give each purchase a certain percentage of the global account/position value that gets adjusted every time you invest more or withdraw some. It seems much easier to track to me and would take care of your (fairly major over the years) problem.

That is less interesting and less accurate because, for example, I bought a few shares when the stock market dipped in mid-October - I've made a lot of money on those shares, about 8%.  A share bought just a few weeks later is up about 1%

Calculating the recursive reinvested dividends wouldn't actually be too hard, but I would need to write a script, which google sheets doesn't support (that I know of)

Kaspian

  • Handlebar Stache
  • *****
  • Posts: 1536
  • Location: Canada
    • My Necronomicon of Badassity
Re: Investing tiny sums possible?
« Reply #11 on: December 08, 2014, 11:38:48 AM »
I buy index mutual funds through TD.  Regular purchases have a minimum of $100, but pre-authorized purchase plans can go as low as $25.  (No fee for purchase.)

imbros

  • 5 O'Clock Shadow
  • *
  • Posts: 48
  • Location: WI
Re: Investing tiny sums possible?
« Reply #12 on: December 08, 2014, 12:15:48 PM »
I got tripped up by the 3k minimum account balance on Vanguard (I have about half that in USD right now), so I'm doing Betterment until I hit that. Once I'm up to 3K, I plan to move it over to Vanguard and do ETFs or index funds.

You need only $1K to start investing in Vanguard. STAR (VGSTX), which is a pretty good balanced fund, has minimum of $1K instead of $3K.

YoungInvestor

  • Bristles
  • ***
  • Posts: 396
Re: Investing tiny sums possible?
« Reply #13 on: December 08, 2014, 06:32:33 PM »


Quote
It's extremely tedious and ridiculous, but totally awesome to see that the Dell Power Supply that I made $34.11 on (after eBay and Paypal fees and shipping) is now worth $36.76 including dividends (though not the reinvestment of those dividends - now that would be complicated - not to mention dividends on those reinvestments - it's recursive!)

You could simply give each purchase a certain percentage of the global account/position value that gets adjusted every time you invest more or withdraw some. It seems much easier to track to me and would take care of your (fairly major over the years) problem.

That is less interesting and less accurate because, for example, I bought a few shares when the stock market dipped in mid-October - I've made a lot of money on those shares, about 8%.  A share bought just a few weeks later is up about 1%

Calculating the recursive reinvested dividends wouldn't actually be too hard, but I would need to write a script, which google sheets doesn't support (that I know of)

I don't think you get the method. This would actually work perfectly given that you apply it to each position individually.

As an example, let's say you have 900$ of stock A at a certain point in time. You sell your bike and get 100$, which gets invested in stock A. The "bike" shares are now worth 10% of your position in stock A.

7 months later, your stock has paid some dividends and raised in value dramatically, and your position is now worth 1900$. You sell your car and buy 2100$ of stock A.

The "Bike" shares are now 10% * 1900 / 4000 = 4.75% of the position and the "Car" shares are now 52.5% of the position.

Your "Bike" shares are worth 190$ at this point, meaning you have a gain of 90% on the bike (or 90$).

After a year, the stock has dipped and the position is worth 1500$. Your "Bike" shares are worth 71.25$ and the "Car" shares are worth 787.5$.

Philo Beddoe

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: Investing tiny sums possible?
« Reply #14 on: December 08, 2014, 07:15:07 PM »
I think this thread is wandering off topic.

Back to what the OP is asking about...I too am interested in this. I currently use Scottrade and like it a lot, but doing this for each trip would get expensive at $7 per trade (though I think that's pretty cheap.)

Have you considered putting the money in Starbucks stock?! That would be fun (and profitable.) Their ticker is SBUX. Just look at the 5 year graph compared to VOO:



Rage

  • Stubble
  • **
  • Posts: 147
  • Location: SoLoNoCo (aka Longmont)
  • Eat the Horses
Re: Investing tiny sums possible?
« Reply #15 on: December 08, 2014, 07:36:08 PM »
If you were going to invest your Starbucks money in SBUX, I would suggest Sharebuilder.  You can set up automatic investing that buys partial shares.  They charge $4 for these types of trades.  So if you set it up to invest monthly or quarterly you could change the amount of the investment every time based on how many Starbucks coffees you have forgone.  I think you're better off going the Vanguard route though.

yandz

  • Stubble
  • **
  • Posts: 122
Re: Investing tiny sums possible?
« Reply #16 on: December 09, 2014, 12:30:58 PM »
Actually, there is a new app out there called Acorns that does exactly what you are asking (and more).  You can round up and invest the change from purchases OR, more in line with what you are saying, make "one time" contributions, but it easily enables those "micro" amounts.  I would be totally into this, but I use YNAB for budgeting and the concept of combining the two makes me crazy.  My friend uses it and loves it.

https://www.acorns.com/ (not an affiliate...obviously, but just wanted to be clear)


Snowballer

  • 5 O'Clock Shadow
  • *
  • Posts: 6
Re: Investing tiny sums possible?
« Reply #17 on: December 09, 2014, 10:24:55 PM »
You could also start a Betterment account.  I realized the mustachian community may not be a fan of this method but I got my wife to start using it and you can deposit as little as $10 per investment for no fees other than the yearly expense ratios shown below:

<$10K = 0.35%
>$10K - <$100K = 0.25%
>$100K = 0.15%

I personally use Vanguard but investments for them are a minimum of $100 for my account.  My wife is new to investing so if we consciously skip a Starbucks trip she drops in 10 bucks... ~2 medium lattes!

JoanOfSnark

  • 5 O'Clock Shadow
  • *
  • Posts: 68
  • Location: Berlin, Germany
Re: Investing tiny sums possible?
« Reply #18 on: December 10, 2014, 12:48:41 AM »
You could also start a Betterment account.  I realized the mustachian community may not be a fan of this method but I got my wife to start using it and you can deposit as little as $10 per investment for no fees other than the yearly expense ratios shown below:

<$10K = 0.35%
>$10K - <$100K = 0.25%
>$100K = 0.15%

I just started down this road and looked the fees up last week, so one part you missed on the expense percentage is that in order for that pricing to apply, you have to have a regular automatic deposit in place. If you don't, it's a flat fee of 3/month.

From their website:
Quote
Betterment charges a management fee of 0.15% to 0.35%, depending on your balance and auto-deposit, and is prorated across the entire year and is charged at the end of each calendar quarter (every three months).

For accounts under $10,000 we provide 2 pricing options. For those who have automated deposits turned on for at least $100/month, the rate is just 0.35%. If you choose not to automate your savings, the fee is still a low flat rate of just $3/month. This is either/or and never combined. After your account reaches $10,000 there are no longer deposit requirements and we focus on reducing your fee down to just 0.25% per year, and then further to 0.15% when your account is over $100,000.

In other words, for those clients with pricing 0.15% to 0.35%, every three months Betterment charges 0.0375% to 0.0875% based on your average balance for the period. If you withdraw all of your money before the end of the quarter you are charged a prorated fee only for the days your money was managed by Betterment.


They currently have a referral situation kind of like YNAB going on, get referred and each get 2 months for free. If anyone is thinking of going that way, feel free to PM me and I'm happy to share my code.

koralcem

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Re: Investing tiny sums possible?
« Reply #19 on: December 10, 2014, 11:33:01 PM »
Much appreciated everybody. Now me and my wife have to talk about the right tradeoff between waiting to pile up $1K/$3K before investing in a Vanguard fund and jumping through the manual hoops for the more quicker approaches. :)