Have you ever run across an example like this? "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 even 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 never make it.
Investing in increments
Maybe you're 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 (NYSE: SYY) 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 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 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 small investments in a few different companies would have done.
- Just $500 in mining giant Freeport-McMoRan (NYSE: FCX) 10 years ago would be worth $3,380 today -- a beautiful annual return of 21%, even after its big decline at the end of last year.
- A similar-sized investment in Adobe Systems (Nasdaq: ADBE), maker of the popular Adobe suite of software, would be worth some $3,065 today, returning a superior 19.9% per year.
- You could have gotten annual returns greater than 25% with small investments in energy company Chesapeake Energy (NYSE: CHK) and retailer Urban Outfitters (Nasdaq: URBN).
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?"
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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 next month. He owns shares of SYSCO and Chesapeake Energy. SYSCO is a Motley Fool Income Investor pick. Chesapeake Energy is an Inside Value recommendation. The Motley Fool has a disclosure policy.