Small investors, foresaken by most professional advisors because they aren't profitable clients, actually have more options today than ever. Case in point is the "lifestyle" fund. Simply put , this is a mutual fund that holds a variety of individual mutual funds instead of stocks - a "fund of mutual funds" if you will.

These funds allow the small investor to get a fair amount of diversification in her portfolio with very little capital. In fact, T. Rowe Price offers a variety of lifestyle funds that can be had for as little as $50, as long as you commit to a systematic investment plan.

You will likely pay a higher expense than on an individual index fund. But you're getting quite a bit of diversity with little hassle. If you're shopping on expenses alone you'll have to turn to Vanguard, but they require a $3000 initial purchase for taxable accounts ($1000 for tax deferred accounts).

A final note, most of the funds that target retirement 15-30 years in the future are composed primarily of equities. Therefore, you have to be prepared to endure the volatility of these markets. While the presence of some fixed income funds may soften the blow, remember that this type of investment "ain't FDIC insured."