Have you ever run across a statement like this one?
"If you had invested $10,000 into ABC Company back then, you would have $X today," and X is always a huge number like 500,000 or 1 million.
I don't know about you, but whenever I see one of those "If you had invested ... " claims, I 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 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 a little bit each month. Is it worth investing that 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 an X! On average, he earned about 23% per year by investing in the food distribution giant.
Back when my friend made that investment, he paid a 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 large fees 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 nowadays better than ever before for small investors to start in the market. Several no longer charge a maintenance fee if you don't have a high balance in your account. And many have direct deposit plans, letting you put a portion of your paycheck directly into your account every payday. Out of sight, out of mind. Without ever "seeing" that money at home, saving is effortless. To see more of what brokers offer, check out the Fool's Broker Center.
It doesn't take much
Instead of the $10,000 mentioned in the annoying statement, let's see what small investments in a few different companies would have done.
- Just $500 in casino operator MGM Mirage
(NYSE: MGM) - A similar-sized investment in Suncor Energy
(NYSE: SU) - Greater than 18% annual returns could have been had with small investments in truck manufacturer PACCAR
(Nasdaq: PCAR) (NYSE: CCJ) (NYSE: DNA)
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 a few years, or 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.
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This article was originally published on Feb. 27, 2007. It has been updated.
Jim Mueller has to admit that he rooted for the New York Giants. He owns shares of Sysco. Sysco is a Motley Fool Income Investor pick, and PACCAR is a Stock Advisor recommendation. The Motley Fool has a disclosure policy.
