Think you need a ton of money to get going in the market? Think again. Every little bit helps, it's true, but when it comes to growing your nest egg, time can be the secret of your success.
Cases in point
1. The maximum contribution to a Roth IRA is $4,000 for tax year 2006. But let's say you're a fresh-from-college 22-year-old who can't quite get that kind of moola together yet. No worries. Kick in what you can. An investment of just $1,000 a year earning the market's historical average of roughly 10% will have ballooned to more than $440,000 at the end of 40 years -- you know, right around the time you'll be looking to retire.
2. Now let's consider Plan B, which finds you waiting until you're 42 to begin making IRA contributions. Good for you for starting, of course, but here's the thing: In order to reach the same results as your younger self by the time 62 rolls around, you'll need to max out your IRA each year and kick in an additional $3,700 to get the job done.
The moral of the story: When it comes to investing, time really is money.
There's more to fattening your nest egg than just kicking in the coin each year, however. Yes, you can obtain the market's rate of return -- minus expenses -- by investing in index trackers like Vanguard 500 Index (VFINX) and the Spiders (SPY) exchange-traded fund, both of which count the likes of Bank of America
The thing is, getting an earlier start means that you can make more aggressive plays, too. You might choose to do so through proven, actively managed mutual funds, or through racy but promising individual stock picks. Broadcom
Make no mistake: Stocks such as these are hardly volatility-free, and even daredevil investors should perform a gut-check before diving in. Growth-oriented high-fliers simply have farther to fall than value-priced fare when Mr. Market turns moody.
Still, while it's often said that youth is wasted on the young, that's just not the case when it comes to investing -- provided you invest Foolishly, of course.
Helping you do just that is the goal of Motley Fool GreenLight. The personal finance and investing newsletter service may be young, but we've already tackled many of the core questions with which new investors grapple: How to build a portfolio from the ground up, how to keep a lid on investment costs, and how to know when it's time to sell a stock, to name just three.
What's more, in the issue that's in the works right now, we highlight smart ways to give the gift of investing to your children, and we zero in on a trio of picks -- two stocks and a mutual fund -- that you and your kids should love.
So whether you're looking to get started yourself, or help an investing rookie get off on the right foot, consider giving GreenLight a go. A free 30-day guest pass is yours for the clicking, and while we think you'll like what you see as you explore our archives and feature-rich companion website, there's no obligation to stick around if you find it's not for you. Time may be money, after all, but hey, money is money too!
Shannon Zimmerman runs point on the Fool's Champion Funds newsletter service and co-advises GreenLight with his pal Dayana Yochim.At the time of publication, Shannon didn't own any of the securities mentioned above. Bank of America and JPMorgan are Motley Fool Income Investor recommendations. You can check out the Fool's strict disclosure policy by clicking right here.