Small investors can still find decent funds

— -- Sometimes it's fun to daydream. What if watchdogs could tell time? What if carpenter ants built itty-bitty gazebos? What if mutual funds allowed small investors to own a slice of a diversified portfolio of securities?

Actually, mutual funds are pooled investments. But the fund industry — particularly funds sold without a commission, or load — has largely forgotten that mutual funds were designed for small investors. Fortunately, a few funds still remember the wee folks.

Want to open an account at Fidelity's largest stock fund, Contrafund? That will set you back $2,500. (To be fair, you can open an individual retirement account at Contrafund for $500.) Vanguard's largest fund, Vanguard Total Stock, wants $3,000, even for an IRA. Dodge & Cox Stock wants $2,500, or $1,000 for an IRA.

The median family income in 2007 was $61,355, according to the Census Bureau. (Median means that half were higher, half lower.) For a typical family, finding $2,500 or more for an initial investment is tough — particularly in times like these.

Funds don't like small accounts because they're expensive to maintain. On the other hand, the fund industry maintains a fairly comfortable profit margin — often more than 20% — and rakes in significant amounts of money on their flagship funds. For a quick, back-of-the-envelope calculation, consider the $39 billion Fidelity Contrafund, which has a fine long-term record.

The fund charges 0.89% of assets for expenses, such as salaries, printing statements and keeping the electric bill paid. On a $39 billion fund, that comes to $347 million. For the larger funds, at least, keeping track of smaller accounts shouldn't be that much of a burden to bear.

Many broker-sold funds will let you start a mutual fund account for much less than no-load funds will. The American Funds Growth Fund of America, for example, will take an initial investment of $250, either for a taxable account or an IRA. You will, however, have to buy the fund through a broker, who will charge you a 5.75% commission. Don't expect a lot of investment advice for $14.38.