Thursday, June 24, 2010, AM | 1 Comment
I know these are hard times but most of us can save at least $50 a month sometimes just only by not munching on snacks from vending machines.
Some of us, especially the younger ones, can save money by skipping to buy one video game a month. That could easily save you $50 a month because on the average that’s how much a video game costs.
Once you start saving $50 a month, do you deposit it in your savings / checking account? With the interest rate so low, these types of accounts have very dismal performance.
The stock market, on the other hand, has been on a rebound and has gained quite a bit during the last few quarters. So why not invest in stock market? Most folks are into stock mutual funds. They feel comfortable with it. But they are managed by professionals.
However, you can go solo by buying into individual stocks. The online world has great tips and tools to help you do exactly that.
Where can you invest $50 a month?
The key here is to select the stocks of a few major companies that have had long histories of rising earnings and dividends. Forget about market timing. Familiarize yourself with Dollar-cost averaging is key to success when investing. Invest the $50 every month consistently whether the market is going up or down.
Invest in proven winners
Do research online. You would find companies that have consistently paid dividends. Make sure each company has a Dividend Reinvestment Plan (DRIP) that does not charge commission. Try to own stocks for 5 to 8 such companies, each preferably in a different industry.
Open a brokerage account
Use the account to purchase your initial stocks in the companies you have selected. To enroll in a company’s DRIP, you must first own a single share of its stock. Consider using a discount brokerage account.
Sign up for each company’s DRIP
After you enroll in a DRIP, your next quarterly dividend will be used to buy a fractional share of stock. Newly purchased shares must be registered in your name and held by the company or sent directly to you. They are not held by your broker. Each quarter, the company will mail you a statement showing exactly how much stock you own.
Buy more shares commission-free
The company’s optional cash payment plan allows you to buy additional shares of stock by mailing the purchase price to the company without paying a commission for the new shares. It’s better to invest in a different company each quarter, rotating among all companies you have chosen.
In a Nutshell
Don’t try to time the stock market. Save the $50 a month by avoiding just the munchies. Invest it by buying individual stocks. Do it yourself online and have fun with it.