How Much You Invest Doesn’t Matter!

Good morning!

Earlier this week, I posted an Ask Wealthy Joe question from someone who wanted to start investing but was unable to come up with the funds to do so out of her regular paychecks.  I advised her to use 20 percent of her income tax refund.

Now, suppose your tax refund is $1,000.  20 percent of that is $200.  That’s not a lot of money, and I know that some of you are wondering why you should bother if that’s all you have.

I know this because in The Stock Market is For Everyone, I suggest to people that they begin with a small amount out of every paycheck, and I have been asked how that could possibly make a difference in one’s financial future.

There’s a misperception that you need a lot of money to start investing.  That is NOT THE CASE!

Here’s the thing: The most important factor in your success as an investor is the performance of the asset class – in this case, the stock.

I said this the other day when I was talking about how people make the mistake of choosing penny stocks because they can get more shares for their money.

“What would my little $100 do?” you ask.

Well, the answer is “it depends.”

If you invest in a company that doesn’t perform, then your money won’t grow very much.  That’s the same whether you invest $100 or $100,000.

For example, let’s say you bought one share of IBM (NYSE: IBM) in 2006 at $82.20 a share.  That investment would be worth $136.80 today.  That would be a 66% return over 13 years.

Let’s compare that to buying one share of Apple (NASDAQ: AAPL) in 2006 for $71.89.  That investment would now be worth $1669, or 23 times your investment.

Get it?

Obviously, the more you have to invest, the more you can gain.  I encourage you to invest as much as you possibly can!

However, the performance of the stock trumps the amount you invested.

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

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Ask Wealthy Joe: I Can’t Afford To Invest! Seriously, I Can’t!!!

can't afford to invest

A: Fact: 20% of your income determines 100% of your wealth.

Whether you make $45,000 or $1,000,000, what you do with your income, as well as debt, are the two biggest factors.  I have written a number of posts on this topic.

It’s a reality, though, that some people are unable to save any money throughout the year, despite managing their income responsibly.

My advice to people in your situation is to take 20% of your income tax refund and invest it.

Just 20%.

Start an emergency fund with the rest, if you don’t have one.  Pay down debt.  Use some of your refund for a vacation.  But invest 20%.

See, compound interest is an extraordinary thing.  It can turn $100 into $7000 over time.

That may not be life changing.

But if that’s all you can do for now, it’s better than doing nothing.

Please feel free to share your questions with me!  Email me here.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)