One of the quick and easiest ways to start investing your money is in the stock market. History shows that over any 20 year period the stock market has outperformed every other asset class. One quick way to jump in the market is to use a long-term investing approach and dollar cost average in the market. What you will do is to put $50 dollars a month into the market until you retire. If you can afford to put more, that is good, but the goal is to be able to do this every month.
To start, you will have to open a brokerage account and I suggest Sharebuilder, now owned by ING Direct. It is an online brokerage that allows you buy pieces of shares of stocks. That way you don’t have to worry about not having enough money. There is also no account minimum, no inactivity fees and it’s services are targeted for the everyday investor. This is how I got my start in investing and it takes no more than 30 minutes to set up. Right now you can buy stocks for $4 with their automatic investing service. Once you set it up, it will deduct your amount each month from your bank account and invest it in the stock market for you. It’s that simple!
What stocks should I buy?
All of them! Standard and Poor’s, a market research firm, created a basket of 500 stocks that serve as a benchmark for the stock market’s performance. Named the S&P 500, this is what mutual fund managers use to gauge whether they are performing better than the overall market. Once you set up your account, you want to invest your $50 dollars each month into the SPY, which is the stock symbol for the S&P 500. The average return for the S&P since 1926 has been a little over 10%! $50 dollars a month would turn $15,000 dollars invested over the next 25 years into a little over $64,000! Not bad for 30 minutes of work! As you get older and start making more money, you can increase the amount you put in. Please note that about 70-80% of mutual fund managers fail to beat the market each year. So by buying the S&P 500 index you will be inline with the market and hence beating most people who manage money for a living!