To build wealth, your best $5,000 choice is a low-cost, widely diversified fund. Here are some to consider.
By
Michael Sivy and George Mannes, MONEY Magazine
NEW YORK (MONEY Magazine) - The best long-range investments for beginners are mutual funds that come with no sales commissions and low annual fees (so that more of your money goes to work) and that spread your stash over a wide swath of the stock market -- and maybe the bond market too (because diversification equals safety).
Remember, with investing, consistency is the key. High-quality stocks may provide an average return of about 10 percent a year, but only if you buy at reasonable prices. If you put all your money in the market when it's at a peak, you'll end up with below-average returns even if you hold on for decades.
You can minimize that danger by investing a set amount of money regularly, what's called dollar-cost averaging. Here are three funds that are a good place to get started investing. 
| Fund (Ticker) |
5-yr return1 |
Min. init.
investment |
Phone (800) |
The lowdown |
| Vanguard Total Stock Mkt. Index (VTSMX) |
6.9% |
$3,000 |
851-4999 |
Nothin' but stocks. This fund essentially owns all U.S. stocks and will earn what the stock market earns, year in, year out. In the long run that should beat most other U.S. funds. |
| T. Rowe Price Retirement funds |
N.A. 2 |
$2,500 3 |
638-5660 |
The no-brainer. These funds own a mix of stocks and bonds that gets more conservative as you age. A great pick if you just want to sock your money away and forget about it. |
| Fidelity Balanced (FBALX) |
10.0% |
$2,500 3 |
343-3548 |
Let the pro decide. This fund combines stocks and bonds in a shifting mix determined by the fund's manager. A good way to stick your toe in the water if you're nervous about stocks. |
Notes: As of April 3. N.A.: Not applicable. 1Annualized. 2Returns vary by retirement date. 3Lower minimums available for some IRAs and regular electronic investments.
Sources: Morningstar, the funds.
