Anna Nerys: Hey Joy, how much was that sandwich?
Guest: About 8 dollars.
Anna: Eight dollars a day means… you’re spending about 250 dollars a month on lunch. Over the last 20 years, if you’d invested that 250 dollars a month — your sandwich money — into the S&P 500, about how much would you have today?
- About 60,000 dollars
- Over 100,000 dollars
- Just over a quarter of a million dollars
Guest: Hmmmm, A?
Anna Nerys: Believe it or not, the answer is actually C, over a quarter of a million dollars. Even your lunch money can lead to impressive long-term growth.
Investing — we know it’s important, but getting started can feel overwhelming. How do you begin? Where should you put your money? And when is the “right” time? Getting started might be simpler than you think. Today we’re digging in to show how you can turn your seeds into sunflowers.
I’m Anna Nerys. Around here, there are No Bad Questions.
So, how do you start investing?
First off, let’s dispel the myth that you need a lot of money to start investing. Even small, regular contributions can become something substantial. Here’s how:
Many brokerage accounts offer fractional investing, which lets you buy part of a share instead of a full one and still experience growth.
Compounding is when your returns start making their own returns, creating a snowball effect to increase your growth.
Take a look at this: Over the last 20 years, if you’d invested that 1 dollar a month in the S&P 500, your 240 dollar total contribution would have increased to 1,100 dollars today. That’s impactful growth. Now take a look at what happens when the contribution increases: 10 dollars a month would become 10,700 dollars. 100 dollars a month would turn into 108,000 dollars. And 500 dollars a month? That would have grown to 584,000 dollars today!
Now that we’ve established you can start investing with any amount, the next thing you need to do is figure out the right way for YOU to access the market. There are a couple of traditional paths for this:
You could hire an ADVISOR – this is a person or organization that makes and manages investments on your behalf. They often have a wealth of experience and can provide insights, advice and a comprehensive or customized approach to your goals. And you pay for that service.
Another option is SELF-DIRECTED INVESTING – this is exactly what it sounds like: you’re doing the research, making picks and investing yourself. I know that can sound intimidating, but we’ve come a long way from this:
These days you can easily sign up and manage everything through an online brokerage platform or even an app on your phone.
The good news is: you get total control of what you invest in. But you’re also the one responsible for the decisions.
Don’t worry. If self-directed investing sounds like the right path for you, there’s a simple way to start. Before we get to that, let’s make sure these options take root.
You can think of starting to invest like starting a garden.
You could hire a gardener to turn that patch of dirt into a full-fledged forest. They’ll select the plants, handle the work and maintain that garden – and you pay them for that service.
That’s an advisor.
On the other hand, maybe you’ve got a green thumb. You do a little research, figure out your budget, and visit the local nursery, picking one plant at a time or taking home a wheelbarrow full of seedlings.
This is self-directed investing.
If this sounds like you, the important thing to remember is: you don’t have to do everything at once, you just have to get started – and it doesn’t need to be an expensive start, it can be as low-cost as a single packet of seeds. As time goes on, and you watch your garden grow – you’ll start to get a sense for what’s thriving and what needs pruning — and you can keep adding and expanding your plot as you go.
So what should you plant?
That can depend on what kind of garden you’re hoping to grow. For many investors, a simple place to begin is broad diversification. That’s where ETFs can help. An ETF bundles many investments into one purchase. Instead of buying one stock, you buy an ETF that holds a basket of stocks.
It’s like starting with a mix of seeds instead of relying on just one seed to take root. And remember, you don’t need to buy a whole share to benefit thanks to fractional investing.
And of course, the biggest tip for starting investing or gardening is to begin. The longer you do it, the more time it has to grow and flourish.
Investing carries risk. Before you put your money into anything — even a super cute trowel — you should give it careful consideration. Always do your homework.
The best time to plant a tree was 20 years ago. The second best time is now. The same is true for investing. Time is one of your most powerful tools… but only if you use it. And remember, when it comes to investing, there are No Bad Questions.