Have you ever run across the following? "If you had invested $10,000 into company XYZ back then, you would have X today," where X is always a large number like $500,000 or $1 million. I don't know about you, but whenever I see a statement like that, I always end up 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 try to save for the future. I manage to save a few hundred dollars a 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 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 a result. On average, he got just less than 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, 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 set you back less than $10 per trade, and they no longer charge extra for buying less than a round lot.
Many brokers also have a couple of other features that make the present a better time for small investors to get started in the market than ever before. First, several no longer charge a "maintenance" fee for not having a high balance in the account. Second, many have direct-deposit plans, letting you put a portion of your paycheck directly into your account every time you are paid, automatically. Out of sight, out of mind. If you never "see" that money at home, the savings doesn't require any effort on your part. To see what different brokers have to offer, check out our Broker Center.
It doesn't take much
Instead of $10,000 as in the statement above, let's see what a small investment in a few different companies would have done. Just $500 in biopharmaceutical Celgene (NASDAQ:CELG) 10 years ago would be worth almost $35,000 today, a whopping annual return of 53%. A similar-sized investment in Whole Foods (NASDAQ:WFMI), the organic-food supermarket, would be worth nearly $2,000 today, returning a market-beating 15% per year. Greater than 20% annual returns over 10 years could have been gained with small investments in phone giant Nokia (NYSE:NOK), game-equipment maker International Game Technology (NYSE:IGT), or precious-metal miner Goldcorp (NYSE:GG). And that's including the recent market turmoil. Amazing, isn't it?
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 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.
"Thank you, sir! May I have another?"
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This article was originally published on Feb. 27, 2007. It has been updated.
Jim Mueller now lives near Washington, D.C., and thinks the Redskins' chances are marginal, at best. He owns shares of Sysco. Whole Foods is a Stock Advisor recommendation. Sysco is an Income Investor choice. The Motley Fool has a disclosure policy that doesn't fumble or get intercepted.
