What Are You Waiting For?

Today is certainly an uncertain time in the stock market. However, history has shown that when the bear is roaring loudest, that is the time to invest. Many times, though, you'll 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 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 and 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 BlackBerry maker Research In Motion (Nasdaq: RIMM  ) 10 years ago would be worth just shy of $12,000 today, an outstanding annualized return of 37%.
  • A similar-sized investment in Activision Blizzard (Nasdaq: ATVI  ) , the video game producer, would be worth over $5,500 today, returning an excellent 27% per year.
  • You could have gotten average annual returns greater than 17% with small investments in natural gas supplier Chesapeake Energy (NYSE: CHK  ) , oil producer Petrobras (NYSE: PBR  ) , or miner Southern Copper (NYSE: PCU  ) .
  • You wouldn't even have needed to be invested in companies like those commodity big boys, either. Boring companies like comic -- and now movie -- maker Marvel (NYSE: MVL  ) or telecom Qualcomm (Nasdaq: QCOM  ) would have turned small amounts into thousands of dollars, too.

And that includes the recent market turmoil. Amazing, isn't it?

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 Redskins 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 25 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.

Jim Mueller lives outside Washington, D.C., and hasn't ever been to a live game of pro football, Redskins or otherwise. He owns shares of SYSCO, Southern Copper, Marvel, and Chesapeake Energy. SYSCO and Petrobras are Motley Fool Income Investor picks. Chesapeake Energy is an Inside Value selection. Activision and Marvel are Stock Advisor choices. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 12, 2008, at 6:17 PM, cruzn59 wrote:

    this is good article with a good question. the problem is everytime the market goes up, large shares are still being sold, via short selling and hedge funds. Please help us average investors. How do you compete with the fact that they make money when it is going up and when it is going down. it is not as fun to play stocks as it once was. the wealthy have put too many sneaky new rules that let them run wall street like a casino. other nations have taken notice and it will be along time before foreign investors become blood brothers with american business men and women. new money will go to europe and china. is that what the ivy league schools are all about anymore? does anyone remember why they were built? not likely.

  • Report this Comment On November 13, 2008, at 11:02 AM, pondee619 wrote:

    In fact, for many, it's amounted to less than nothing. Consider how these stocks have done over the past 10 years:

    Stock

    10-Year Average Annual Return

    Disney (NYSE: DIS)

    (1.8%)

    Big Lots (NYSE: BIG)

    (2.4%)

    Coca-Cola (NYSE: KO)

    (2.6%)

    Lennar (NYSE: LEN)

    (1.8%)

    Honeywell (NYSE: HON)

    (2%)

    Time Warner (NYSE: TWX)

    (5.4%)

    Eli Lilly (NYSE: LLY)

    (6.7%)

    Source: Yahoo! Finance, as of market close on Nov. 11, 2008.

    Those negative returns are especially annoying when you think about the risks you took to get them. You endured one full bear market -- and at least the beginning of a second. You want to get the reward for taking that risk -- but there's no reward right now.

    What might have been

    Even more irritating is that you could have gotten so much more by taking a lot less risk. Here are some of the alternatives you could have picked:

    An ultra-safe Treasury money market fund has earned an average of about 3.2% annually since 1998.

    In 1998, you could have bought a 10-year bond from the Treasury yielding more than 4.8%.

    An inflation-adjusted Treasury note auctioned in 1998 yielded 3.65%, not including inflation adjustments.

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