Invest monthly without getting killed by commissions

— -- Q: Is there a way to buy a few shares of stock every month without being killed by commissions?

A: Stock commissions have dropped by an incredible amount the past 20 years. Still, they can still chew up a beginning investor's portfolio.

Let's say you open a brokerage account with $500 and plan to buy $100 of stock every month. Even if you start with a brokerage firm that charges a relatively modest $10 a trade, you'll have taken a 7% hit on your portfolio due to the commissions. That's a ridiculously high toll on your account; much larger than some mutual funds charge as an annual fee.

But don't worry. There are options for you:

• Consider an online brokerage geared toward beginning investors who make regular investments. There are several. BuyandHold.com and Sharebuilder.com are two that come to mind.

Buyandhold.com charges $7 a month and then lets you make two trades a month. But since you plan to do just one transaction a month, ING Direct's Sharebuilder is probably a better option. Sharebuilder lets you trade stocks for a $4 commission. And Sharebuilder has another feature you might like; it lets you automatically pull money out of a checking or savings account to regularly invest.

• Think about buying mutual funds. While mutual funds may not be as exciting as individual stocks, in your case, they may be more economical. Most mutual fund companies let you set up accounts with low minimum balances and buy and sell funds for no commission. Some, too, will automatically debit money from a checking or savings account and make investments at regular intervals.

That's not to say that funds are free. They're not. Most collect annual fees that range from 0.1% for the lowest-cost index funds to 2% or more. This is a fund's "expense ratio" and you won't be billed for it, but it comes out of the fund's assets. These fees can eat into your returns, although they are much less than the hit you'd take paying a $10 a trade commission.