BELLEROSE MANOR, NY (Sept. 23, 1999) -- Two things often discourage the average Fool from investing in stocks: the worry that they don't have enough money to "make a difference," and the fear that they lack sufficient investing savvy to pick the right companies. Neither should dissuade anyone from entering the investing arena as a direct, or Drip, investor.

As the Fools wrote in their 13 Steps to Investing Foolishly, all it takes to Drip invest is as little as $20 per month. You don't need a degree in finance to select stocks. Just use common sense -- invest in companies whose products you know to be superior, and try to choose from companies that have fee-less Drips. (See "Should I Accept Fees?") That's how I did it.

I'm married, with three small children, a mortgage, student loans, a car loan, child care expenses, etc. Money is tight and we live from paycheck to paycheck. This scenario probably sounds familiar to many of you. Under these circumstances, one could easily conclude that there is no money for stock investing. Examining our situation, I concluded that if we waited to invest until all our debt was paid off, we would probably never invest.

Accordingly, I consolidated and refinanced all our debt at the lowest rates possible, and began Drip investing in 1997. What were my investing goals? None -- other than a desire to invest in stocks rather than to transfer what meager savings I could forage to a bank. I was armed with the knowledge that, historically, the stock market has earned investors in excess of 10% annually as compared with much lower returns offered by banks.

I chose to invest in Exxon (NYSE: XON), buying my first shares through its direct stock purchase (DSP) program. Why Exxon? Many of Exxon's fans (to wit, Racerboy, aka TMFRacer) have extolled its virtues on the Drip board, but they bear repeating. Exxon is a company whose product I recognize and use, and one I feel will always be in demand. As one of the Dow 30 stocks, it offers consistent earnings, relatively low risk, and an investor-friendly Drip. The Drip features no fees (not even "company paid" fees which are considered income), a fee-less direct stock purchase plan with a $250 minimum initial investment, weekly purchases of stock with optional cash payments (OCPs) of a minimum of $50, the ability to transfer shares from your account to establish accounts for minors at no charge, and a readable statement.

I set up the account using the DSP by scrimping for several months until I had the minimum $250. I brown-bagged my lunch every week. I skipped "boutique coffee" and used the office coffee drip machine. Instead of buying tokens to get to work, I bought Metrocards, which give you a free fare for every $15 Metrocard you buy. Every dollar I saved went into a no-fee checking account I used to write checks to the Drip. Whenever I reached the $50 minimum or better, I sent in payments. Once or twice, when I had some extra cash from a rare windfall, I put that in.

The table below records my investments over an 18-month period. I suspended my OCPs in early 1999 due to share price appreciation and in order to diversify into other companies.
Date          Trans.   Amt.   Share      # of    Total 
Purch.                        Price    Shares   Shares
11/20/97   1st Purch  $250   62.463    4.002    4.002
12/11/97      OCP       60   62.887     .954    4.956
12/26/97      OCP       50   60.782     .823    5.779
1/08/98       OCP       80   59.941    1.335    7.114
1/22/98       OCP       65   59.582    1.091    8.205
1/29/98       OCP       50   60.436     .827    9.032
2/05/98       OCP      100   61.967    1.614   10.646
3/05/98       OCP       50   62.974     .794   11.440
3/10/98  Div. Purch.  4.36   63.134     .069   11.509
4/02/98       OCP       65   69.486     .935   12.444
4/23/98       OCP       85   73.495    1.157   13.601
5/14/98       OCP       50   73.456     .681   14.282
6/04/98       OCP       50   69.743     .717   14.999
6/10/98  Div. Purch.  5.58   70.338     .079   15.078
6/18/98       OCP       65   70.489     .922   16.000
6/25/98       OCP       50   72.564     .689   16.689
7/09/98       OCP      120   71.933    1.668   18.357
7/30/98      OCP     2000   71.597   27.934   46.291
8/13/98       OCP      100   67.616    1.479   47.770
8/27/98       OCP       50   69.955     .715   48.485
9/10/98  Div. Purch. 18.98   65.712     .289   48.774
9/17/98       OCP       60   68.924     .871   49.645
10/01/98      OCP       50   70.961     .705   50.350
10/29/98      OCP       50   71.550     .699   51.049
12/03/98      OCP       50   70.413     .710   51.759
12/10/98 Div. Purch. 20.93   72.087     .290   52.049
12/31/98    OCP       60   73.616     .815   52.864
2/25/99        OCP       50   67.337     .743   53.607
3/10/99  Div. Purch. 21.67   68.630     .316   53.925
4/15/99      OCP       50   76.680     .652   54.575
6/10/99  Div. Purch. 22.38   80.103     .279   54.854
As of this writing, the value of Exxon stock is around $80 per share, and the value of my shares is around $4,388. I'm no mathematician, but that's about $728 more than the $3660 I invested, or 19.9%. Annually, that comes to around 13.3%, which is almost five times the 2.75% the local savings bank is paying for liquid savings accounts.

If you factor in reinvested dividends, my shares appreciated about $634.10 above the total investment (cash and dividends) of $3753.90, or 16.9%, amounting to 11.3% annually. That is four times what the banks are paying. When you consider these numbers, keep in mind that the petroleum industry as a whole has not performed well during most of this period due to deflated crude oil prices.

Nevertheless, investing a small amount, over a short time, in an underperforming sector, I still came out with over 10% returns. So much for the notion that you can't invest in stocks without a lot of money or experience.

Remember� one drop at a time, Fool!

Fool On!


[Nelson E. Timken posts on the Drip boards as FoolishFinancier.]