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Five Great Funds If You Don't Have a Lot of Dough

Automatic investing plans get you into good funds for very little money.

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Stocks are on sale, and this is a great time to commit more money to the market. "What money?" is the response I get from some people, and understandably so. After all, money's tight. Bonuses and pay are down at companies all over the country. People are worried about their jobs, so they naturally want to build up a healthy pile of cash.

If you're a little short on money to invest, consider funds that allow a low minimum initial investment to dollar-cost averaging. Not only is it a way to build up your investments, but it also enables you to take advantage of the falling market. Two market skeptics turned bulls, Jeremy Grantham and Bob Rodriguez, have said that they are investing steadily and deliberately over an extended period of time. You can do the same with automatic monthly investments. Here are a few of my favorites with a minimum initial investment and a commitment to monthly investing of just $250 or less.

 T. Rowe Price Retirement 2040 (TRRDX)
Automatic investments can work for people of most ages, but this approach is particularly attractive for people new to the workforce. Target-date funds are broadly diversified, and they even handle asset-allocation shifts that you need to make over time. To make this really work, though, you need to step up your monthly contributions over time in order to build up a good nest egg. When you start to have larger sums to invest, don't just move on to other funds or stocks and leave this as a tiny portion of your portfolio. Keep investing in this fund so that it can work as your core holding.

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Russel Kinnel has a position in the following securities mentioned above: JENSX. Find out about Morningstar’s editorial policies.