[f97tosc]

Largely agree with kimchi although I would say that I would probably put either more in an index fund or skip it altogether - 1 or 2 k is not worth the tax issues and the transaction fees.

Regarding taxes, interest and dividends are taxed basically as income, typically at a much higher rate than capital gains that you get from stock (and index fund) appreciation (assuming you held it more than a year. Also, the capital gain tax triggers whenever you trade, so if you do get index funds, keep them for as long as possible and start taking out money from the other sources first.