In my role as managing editor of The Motley Fool newsletters, I get to interview a lot of talented job applicants who are lured by our fun atmosphere, our irreverent content, and our office pizza day on the last Friday of every month.
We get dozens -- even hundreds -- of applications for every opening, so the people chosen for interviews are generally very qualified, very impressive candidates. But amazingly, many of these intelligent people who have an expressed interest in working for a company that specializes in stock advice share a trait: They don't own any stocks.
I hear it all too often: "I know I should, but ..." It's almost an apology, an admission of guilt. Nine times out of 10, the reason is the same: I don't have enough money to invest.
I walk out of these interviews shaking my head, startled that such charlatans made it so far through the interview process.
But then I remember that when I joined the Fool 20 months ago, I had exactly three stocks in my portfolio -- Ford,FuelCell, and Ballard Power -- each $200 position purchased with amassed birthday money during my tree-hugger days, when I was certain (or maybe just hopeful) one of those companies would reduce our nation's dependence on oil. Yeah, they were woeful underperformers. Moreover, a portfolio with three scrawny holdings was not going to impress anyone at the Fool. I probably told my interviewers I would have bought more, but I didn't have enough money.
The secret
In my time at the Fool, I've learned a valuable lesson that seems to be a secret from all those interview candidates and thousands of other potential investors: It doesn't take much money to invest.
The fact is you can get past the starting line for about the cost of -- to pick three random examples -- any of an array of garish Tommy Bahama silk shirts, the first season of The Sopranos on DVD, or two seats behind first base to see the Washington Nationals play the Baltimore Orioles on May 19. If you go through a low-cost broker such as ShareBuilder, you can invest $100 for $4, costing you 4% in fees. (Generally, you should try to keep fees below 2%, but an extra percentage point or two probably won't break the bank.) Even if you've just bought a new house or have a lower salary than you'd like, or any of the other myriad reasons people offer up, you can likely scrape together $100.
But you have to make it a priority. Challenge yourself. Dare yourself. Threaten yourself. Do whatever it takes to make it happen. Because once you make that first purchase, it'll pave the way for many more. It'll become part of your life. You'll develop a portfolio, and you'll get excited about watching it grow, tuning in to the daily ups and downs (even though short-term movements don't really matter to us buy-and-hold investors). You'll get your first double. You'll reinvest your dividends. You'll keep adding capital. You'll record your first triple. You'll program your XM receiver to display stock tickers. You'll log a 10-bagger and brag about it to your friends, then shake your head at them with pity when they tell you -- gasp! -- they don't own any stocks.
I now own shares of 17 stocks, and I'm startled that it's much easier to find money to invest now that I see how beneficial and enjoyable smart investing can be.
Where to start
OK, it's time to get in the game. I'm going to give you three ideas on how to get started in the investing game. I've plucked two of David Gardner's recommendations in the Motley Fool Stock Advisor newsletter service, which he writes with his brother, Tom. You ready?
- Vanguard Total Stock Market VIPERs (AMEX:VTI)
This low-cost (an expense ratio of just 0.07%, plus trading costs) exchange-traded fund works like a mutual fund but trades like a stock. It tracks the MSCI U.S. Broad Market Index, which is just a fancy way of saying that it follows the performance of all the regularly traded stocks on the three major U.S. exchanges. For beginners, it gives you exposure to "the market," with dialed-up doses of General Electric (NYSE:GE) and ExxonMobil (NYSE:XOM), its two largest holdings that make up 2.58% and 2.46% of net assets, respectively.
- GameStop (NYSE:GME)
GameStop sells products and accessories for PCs and video games. It operates 4,490 stores in three continents, and it enjoys a leadership position in its sector. According to PriceWaterhouseCoopers, the video game market is expected to grow from $22 billion in 2003 to $55 billion in 2009.
- Best Buy (NYSE:BBY)
You've probably been in a Best Buy store once or twice. The company sells consumer electronics, home office products, personal computers, and ... cappuccino machines (among other things, of course). Its retailing concept has made it rise above its competition, and as more and more widgets and gizmos enter the marketplace, Best Buy will be there to profit.
I encourage you to read up on these three stocks. Learn more about what they are and what they do. If you want to see why David likes GameStop and Best Buy, sign up for a free 30-day trial. You'll gain access to those two write-ups and everything else he and Tom have recommended to investors over the years (recommendations that are, incidentally, pummeling the market: Tom's picks are up 76.14%, and David's are up 60.87% compared with the market's 23.72%).
If one of these stocks makes sense to you, do it. Make the purchase. Become an investor. If none of these stocks excites you, keep looking -- at Fool.com, at the Stock Advisor scorecard, or somewhere else. Just find something you like and get started.
The secret is: You're never going to start realizing huge profits as an investor until you start investing.
Click here to redeem your totally free 30-day trial to Stock Advisor. There's no obligation to subscribe.
This article was originally published on Jan. 30, 2006. It has been updated.
Roger Friedman is the managing editor of newsletters and the author of Nipple Confusion, Uncoordinated Pooping and Spittle: The Life of a Newborn's Father . Roger owns shares of Ballard, FuelCell, and Ford (still!). The Motley Fool is investors writing for investors .
