Just do it. Though that's the call-to-exercise ad slogan of a famous maker of running shoes, it applies to investing as well. You don't have to invest a lot of money to make a big long-term difference. Just get started and keep on going.
Putting investment money aside on a regular, dollar-by-dollar, month-in and month-out basis, you'll accumulate a lot more than you thought you could. You can invest the money yourself by check. Or you can let credit unions, investment firms, banks, insurance firms or your employer do it for you through automatic programs.
Call it forced savings. Call it paying yourself first, as you invest each month before paying mortgages and other bills. No matter what you call it, it works. I've encountered a great many people who built wealth not through fancy jobs or inheritance, but simply through tenacious regular investing.
"I have some clients who put away as little as $25 a month and others who put away as much as $5,000," one certified financial planner told me.
Here are ways to invest a small amount regularly:
Company credit unions have payroll deduction plans that let you set aside money each month.
Most mutual-fund companies, after you've made an initial investment in a fund, let you invest a smaller amount monthly by authorizing the fund to draw on your bank account.
Many corporations through their dividend reinvestment programs permit shareholders to automatically reinvest cash dividends in additional shares.
Brokerage firms often offer accounts that permit you to buy stocks or other investments in small amounts regularly.
Annuities and other insurance products, such as universal life, permit small monthly investments after your initial outlay.
At work, employees usually can put money aside through 401(k) salary reduction plans and savings and employee stock purchase plans. U.S. EE Savings Bonds are often bought by payroll deduction.
One advantage of investing in the market in a steady manner is "dollar-cost averaging." That basically means you're investing regularly through the highs and lows of the market, rather than taking a potential hit by investing everything at once at the wrong time. Through dollar cost averaging, if the market and stock prices are down, your regular investment will be buying more shares. If the market and stock prices are up, you'll buy fewer shares with that investment, but shares you bought at the lower prices will rise in value.
Unlike other countries such as Japan, most people in America are credit users rather than savers, so programs such as automatic investment plans and dividend reinvestment plans give them some discipline. Retirement counselors advise that systematic investing should be for a 10-year minimum period because of the economic cycles, but they admit that such an ongoing program is a hard sell to most.
It shouldn't be a hard sell. Money invested automatically without the investor getting involved each month is the most painless way of investing. For example, the Boston-based Scudder, Stevens & Clark mutual fund company requires $1,000 to open an account and, with its automatic investment plan, you can make a monthly payment of as little as $50.
"The amount you designate is automatically debited from your bank account and transferred to your account here on a periodic basis," said Burke Walker, Scudder vice president. "People sign up because they realize that, left to their own devices, they just won't get around to investing."