It is difficult to search for these funds since most fund screeners do not have options to select initial investment levels as low as say $100. Fortunately, TDAmeritrade allows its fund screener to be sorted by Initial Investment Required - so here is a list of bond funds that meet our criteria, courtesy of TDAmeritrade.
Allianz Global Investors Solutions Retirement Income Fund Class R (ASRRX): Yield 2.71%, Minimum Initial Investment: $0, Sales Load: 0, Expense Ratio: 1.42, No Transaction Fees. 12b-1 fee of 0.5%.
PIMCO RealRetirement Income and Distribution Fund Class R (PTNRX): Yield 2.83%, Minimum Initial Investment: $0, Sales Load: 0, Expense Ratio: 1.94, No Transaction Fees. However, it also has a 0.5% 12b-1 fee.
I need one of these as a home for JNK distributions. I guess I will go with ASRRX - least worst of the two options I guess. It really should not be this difficult to find a mutual fund to fit out common sense criteria!
UPDATE: There is such an appetite for NTF, No Load, Low Initial Investment Mutual Fund that this post has become a popular one on this blog. Since so many folks are landing on this page, I would like to mention my final solution to this search: Go With No Transaction Fee ETFs. Explanation below.
The Mutual Fund industry (with the possible exception of Vanguard) is driven by fees. If they provide you with a low initial investment option - then they take their pound of flesh through high management fees. All the three funds mentioned in this post above have atrociously high fees. Fees are the biggest killer of returns - so this is no go from the get go. So what should you do? My solution is to not look for that mythical, ideal mutual fund and instead go with ETFs. You can buy an ETF one share at a time - and so many ETFs sell for 20-30 bucks a pop. Now, this would not be feasible because of the transaction costs - brokerages can charge ~$10 for each transaction. However, you can sidestep that by buying from the list of No Transaction Fee ETFs. Fidelity has 65 such ETFs (all iShares - very high quality ones) while TDAmeritrade has 100 such ETFs (various companies, no all top class). So just choose from this set and you are good to go. I have chosen DVY for Fidelity and JNK for TDAmeritrade, as detailed in this post.
UPDATE: There is such an appetite for NTF, No Load, Low Initial Investment Mutual Fund that this post has become a popular one on this blog. Since so many folks are landing on this page, I would like to mention my final solution to this search: Go With No Transaction Fee ETFs. Explanation below.
The Mutual Fund industry (with the possible exception of Vanguard) is driven by fees. If they provide you with a low initial investment option - then they take their pound of flesh through high management fees. All the three funds mentioned in this post above have atrociously high fees. Fees are the biggest killer of returns - so this is no go from the get go. So what should you do? My solution is to not look for that mythical, ideal mutual fund and instead go with ETFs. You can buy an ETF one share at a time - and so many ETFs sell for 20-30 bucks a pop. Now, this would not be feasible because of the transaction costs - brokerages can charge ~$10 for each transaction. However, you can sidestep that by buying from the list of No Transaction Fee ETFs. Fidelity has 65 such ETFs (all iShares - very high quality ones) while TDAmeritrade has 100 such ETFs (various companies, no all top class). So just choose from this set and you are good to go. I have chosen DVY for Fidelity and JNK for TDAmeritrade, as detailed in this post.
Caravaggio, David with the Head of Goliath
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