Have you ever run across the following? "If you had invested $10,000 into company XYZ back then, you would have X today." Of course, X is always a large number like $500,000 or $1 million.
Whenever I see one of those "If you had invested" claims, I always get depressed. I don't know about you, but I don't have $10,000 to invest all at once!
Like a lot of you, I make a modest salary, pay my bills, and save for the future. I think I'm getting ahead when I manage to save a few hundred dollars each month. Then I read a statement like the one above, and I despair that I'll ever 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 an X! On average, he earned about 23% per year by investing in the food distribution giant.
Back when my friend first 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 like you or me, with only a few hundred dollars to invest at a time, locked out.
Today, though, discount brokers such as TDAmeritrade or Scottrade will charge you less than $10 per trade, and they no longer charge extra for buying less than a round lot.
Many brokers also provide other features that make this a better time than ever for small investors to get started in the market. Maintenance fees for low-balance accounts are often a thing of the past, and many have direct-deposit plans, which let you put a portion of your paycheck directly into your account every payday. Saving is effortless when you never "see" the money. 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 Autozone
(NYSE: AZO) - A similar-sized investment in American Eagle Outfitters
(NYSE: AEO) - You could have gotten annual returns greater than 20% with small investments in video game provider Activision
(Nasdaq: ATVI) (NYSE: RTP) (NYSE: VLO)
That's the way to riches -- starting with just a few hundred dollars and combining it with time. Anyone can do that. 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. In other words, get started.
"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 Yankees 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 more than 43 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 Feb. 27, 2007. It has been updated.
Fool contributor Jim Mueller lives in D.C., but is going to his first Yankees game this weekend. He owns shares of American Eagle and SYSCO. Activision and American Eagle are Stock Advisor recommendations. SYSCO is an Income Investor choice. The Motley Fool owns shares of American Eagle. We have a disclosure policy that makes fascinating reading.
