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.
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.
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