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Taking Stock

What are Stocks?
So, You Want to Start Investing?
Methods of Investing
Investigate the Market
Credit Card Smartz
What is the Dow?
Investing and Saving - what's the difference?
What are Bonds?

Investigate the Market

By Marita Ensio Robinson

What do the following companies have in common: Stein Roe & Farnham, Inc.; Salomon, Smith & Barney, Inc.; Merrill Lynch; CIBC; The Motley Fool; NAIC; and ThinkQuest?

If you guessed Websites with investment programs aimed at you and your friends, you were right. Some of these companies want only to help you become a successful investor; others are also selling investment instruments and hoping that you will start to invest through them. Are you "invested?" If not, what do these companies know that you don’t? They are spending a lot of money to get your attention and convince you to start saving and investing now!

Investment-Savvy

Here’s what brokerage firms know from their research.

Data collected since 1842 shows that money invested in a balanced, long-term stock market portfolio has a better return on investment than money invested in a savings account or many other investment instruments.
A young person can start investing by making small deposits of $25 a month to a mutual fund through a custodial account.
If you start investing wisely as a teenager, you are likely to be a financially healthy — even wealthy — adult!

Start Now

Let’s say you’re 15 years old now. You invest $25 a month in a mutual fund until you’re 25. At age 25, you increase your investment to $50 a month until you’re 35. Then at 35, you increase your investment to $100 a month until you’re 45.

Between the ages of 15 and 45 you would have invested a total of $60,835. Over 30 years of investing small amounts every month, your portfolio would have increased to $312,507* (a total return of 473.20%). How? Through dollar cost averaging and compounding.

Growing Money

Picture yourself at 40, the owner of this portfolio. You’re saying to yourself: "What a snap! I didn’t even miss the money it took to get here. It went straight from my bank account into my fund every month. Even better — this $312,507 is only a small part of my financial net worth!"

How old are you today? Are you "invested" yet? If not, are you thinking maybe you should be? Don’t rush into it. Any experienced investor will tell you that different investment choices put your money at risk to different degrees.

The more knowledge you have about the business of investing, the smarter you will be about deciding where you should invest your money. The smarter you are, the better you’re likely to do. The better you do, the more fun you’ll have!

*This is an imaginary 30-year period investment summary based on market values (1979-1999), with all dividend income and capital gains reinvested for the full 30 years and no annual tax effects taken into account. Example supplied by Lenny Lloyd, Makefield Securities, Boca Raton, FL.