Have you ever run across the following? "If you had invested $10,000 into company XYZ back then, you would have X today," where X is always a large number like $500,000 or $1 million. I don't know about you, but whenever I see a statement like that, I always get depressed. Why? Let me lay it out in clear, unambiguous language.
I don't have $10,000 to invest at one time!
Really. Like a lot of you, I make a modest salary, pay my bills, and try to save for the future. I manage to save a few hundred dollars each month and think I'm getting ahead. Then I read a statement like the one above and think that I'll never make it.
So what to do?
Maybe you are in the same position, able to save what seems like just a little bit each month. Is it worth investing that little bit? You tell me. A friend of mine turned a measly $220 investment in SYSCO into $57,000. Granted, it took him 27 years, but what a result. On average, he got just less than 23% per year by investing in the food distribution giant.
Back when my friend made that investment, he paid a very large commission, both because he bought a few shares rather than a 100-share "round lot" and because brokers charged a lot at the time. Paying such large commissions back then tended to keep small investors, ones like you or me with only a few hundred dollars to invest at a time, locked out. Today, though, discount brokers such as TD Ameritrade or Scottrade will charge you less than $10 per trade and no longer charge extra for buying less than a round lot.
Many brokers also provide other features that make the present a better time for small investors to get started in the market than ever before. First, several no longer charge a "maintenance" fee for not having a high balance in the account. Second, many have direct deposit plans, letting you put a portion of your paycheck directly into your account every time you are paid, automatically. Out of sight, out of mind. Without ever "seeing" that money at home, the savings don't require any effort on your part. To see what different brokers have to offer, check out our Broker Center.
It doesn't take much
Instead of the $10,000 mentioned above, let's see what a small investment in a few different companies would have done. Just $500 in casino operator MGM Mirage
That's the way to riches, starting with just a few hundred dollars. Anyone can do that. All it takes is a small bit of money and some time. If you're in school, now is the time to start. If you've been working for a few years, even many years, now is the time to start. If you've just retired, given the longer life expectancies today, it certainly can't hurt to start.
"Thank you, sir! May I have another?"
The trick, of course, is knowing which stocks to pick. Analyzing stocks takes time. You have to read the annual and quarterly reports, look at margins and returns on equity or assets, and evaluate management. It's a big commitment, and it can be difficult to fit in between work, family, and watching the White Sox play.
If you're looking to get a handle on your investments without sacrificing all of your free time, consider joining Fool co-founders David and Tom Gardner at Motley Fool Stock Advisor. They'll recommend two stocks each month, keep you up-to-date on the picks, and tell you when to sell if that time comes.
Plus, their performance speaks for itself: Their picks are beating the S&P 500 by nearly 40 percentage points on average. You can check out the service free for 30 days by clicking here. There is no obligation to subscribe.
This article was originally published on Feb. 27, 2007. It has been updated.
Fool contributor Jim Mueller lives in Indianapolis and roots for the White Sox. He owns shares of SYSCO. SYSCO is a Motley Fool Income Investor pick, while Paccar is a Stock Advisor recommendation. The Motley Fool has a disclosure policy.
