funds. And it's not that easy anyway.

The minimum initial investment for a mutual fund averages $3,370, up more than $700 from three years ago, Morningstar reports. And 100 shares of popular Internet highfliers like Yahoo! (YHOO:Nasdaq) ($177 per share at Wednesday's close) and eBay (EBAY:Nasdaq) ($199) can run five figures.

What if you just want to put 20 bucks to work? Now there are at least two online brokers, Buyandhold.com and Sharebuilder.com, that will let investors build a diversified portfolio using small change to buy fractional shares of stock. A third service, Foliofn, will launch within a month. Foliofn will also offer fractional share investments, but it's aimed at high-dollar investors.

For as little as $20 and a couple of bucks a trade, Buyandhold.com and Sharebuilder.com offer the chance to put together a customised portfolio. The concept is similar to dividend reinvestment plans or direct stock-purchase plans, in which investors buy stock directly from a company and then put dividends back into fractional shares.

But there's a key difference: Many of today's stock-market darlings, like JDS Uniphase (JDSU:Nasdaq) and Qualcomm (QCOM:Nasdaq), have never heard of dividends, much less anything as old school as dividend reinvestment. What's more, it's impossible to buy those stocks directly from the companies, even though investors are clamoring for them.

By bundling together thousands of investors wanting a piece of Microsoft (MSFT:Nasdaq) or Cisco (CSCO:Nasdaq), the services can keep trading costs down and allocate partial shares to individual customers.

You can buy stocks in dollar amounts, rather than in whole shares, through these online brokers. A key component to keeping costs down is limiting trading to set times. Buyandhold.com trades twice a day (as will Foliofn when it launches). Sharebuilder.com does its trading once a week. These services aren't for active or short-term traders. But "people are willing to trade lower commission fees for lack of precise trading,'' says Charles Carlson, publisher of the DRIP Newsletter and co-portfolio manager of the Strong Dow 30 Value fund. He's also an investor in Buyandhold.com and a member of its board of directors.

For the buy-and-hold investor, these services offer direct ownership of stocks without the layer of fees imposed by mutual funds. For domestic stock funds, these fees average 1.44 oercent of assets annually, according to Morningstar.

But Sharebuilder.com and Buyandhold.com only charge per transaction, so investors who avoid frequent trading can pay less over the long term than they would buying mutual fund shares. And at a cost of $2-$5 for most trades, they also undercut the traditional brokers.

"We're going to do to the online brokers what the online brokers did to the bricks-and-mortar brokers in the '90s,'' boasts Peter Breen, president of Buyandhold.com.

Not everyone sees it that way. Avi Nachmany, president of fund tracker Strategic Insight, believes investors of limited means will feel more comfortable owning mutual funds than stocks. "Mutual funds clients are at the core people who want someone to do the stock picking for them,'' he says.

Parts of this article were drawn from an article in thestreet.com by Ilana Polak.