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Mutual Funds

SOLVED: I'm Living Paycheck to Paycheck. Can I Invest?

How to save for your future on a shoestring budget.

Giving up one latte a day will give you plenty of money to get started. You can put it in a high-yield savings account until you have enough to invest in a mutual fund with a minimum deposit of $1,000 or more.

Or, if you don't want to wait, a number of fund companies -- Ariel Mutual Funds, Investment Company of America, TIAA-CREF and T. Rowe Price -- will let you invest as little as $50 a month if you set up automatic deductions from your bank account or paycheck.

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Your best strategy is to put your money in a fund with a diversified mix of stocks and investing styles. For instance, T. Rowe Price Spectrum Growth (symbol PRSGX; 800-638-5660) invests in ten other T. Rowe Price funds. Spectrum Growth has an annualized return of 9% over the past ten years and 6% over the past five years. Investors pay only the expenses of the underlying funds; investing $600 a year will cost you $5.

Another one-stop alternative is a target-retirement fund, which shifts its asset mix to become more conservative as you get closer to retirement. T. Rowe Price Retirement 2040 (TRRDX), launched in 2002, has returned an annualized 14% over the past three years.

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Think of it: If you invest $50 a month in an account that earns 8% annually, you will have $74,518 in 30 years. Not a bad start for living paycheck to paycheck -- and you can always bump up your investments as that paycheck gets bigger.

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