Today is certainly an uncertain time in the stock market. However, history has shown that when the bear is roaring loudest, that's the time to invest. Many times, though, you'll run across the following: "If you had invested $10,000 into company ABC back then, you would have X today." Of course, X is always a large number like $500,000 or $1 million.
I don't know about you, but 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 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 despair at never making it.
So what to do?
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
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 TD Ameritrade or Scottrade will charge you less than $10 per trade and 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 before 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 gold miner Agnico-Eagle Mines
(NYSE:AEM)10 years ago would be worth $5,290 today -- a beautiful annual return of more than 26%, even after its big decline at the end of last year.
- A similar-sized investment in Valero Energy
(NYSE:VLO), oil refiner, would be worth some $2,500 today, returning a superior 17.5% per year. In addition, you could have gotten into oil a bit further upstream. Five hundred bucks in Occidental Petroleum (NYSE:OXY)would net out to over $4,500 today. That's an astounding 25% per year average.
- Or you could have been ahead of your time, realizing that speech-recognition could be a growth industry. Nuance Communication
(NASDAQ:NUAN)would have rewarded you with more than $4,000, at 23% per year on average.
- Finally, health care and pharma could have been good plays with both Unitedhealth Group
(NYSE:UNH)and Teva Pharmaceutical (NASDAQ:TEVA)both growing more than 16% per year.
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 Gators play.
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This article was originally published on Feb. 27, 2007. It has been updated.
Fool contributor Jim Mueller missed watching the Gators win. He owns shares of SYSCO, which is an Income Investor pick. Nuance Communications is a Motley Fool Hidden Gems recommendation. Unitedhealth Group is a Motley Fool Inside Value pick. Unitedhealth Group is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Unitedhealth Group. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.