Where should I start if I only have $500 to invest, and only two days a week in which to monitor my investments?

Where should I invest?

Question:

Where should I start if I only have $500 to invest, and only two days a week in which to monitor my investments?

Answer:

The amount of money that you have to invest might not be all that relevant. The bigger issue has to do with closely monitoring your portfolio. Few among us have the time, the skills, the willingness to closely monitor our investment portfolios.

If you were to invest in individual stocks, you should be monitoring the quarterly earnings reports and other news stories about all of your holdings.

Unless you are willing to closely monitor your portfolio, you best option is simply investing all of your money into index funds. Most brokers — like Vanguard, TD Ameritrade, Schwab, Fidelity, etc. — offer them.

I believe Schwab might be the only one mentioned above which doesn’t require a minimum deposit, so you might want to invest your money there.

Regardless of where you choose to invest, simply put your money into an S&P 500 index fund,

This broad-based fund which includes 500 of the largest companies — think Apple, ExxonMobil, Microsoft, etc. — and the fees on these types of funds is quite modest.

The annualized, long term historic returns have been:

  • 7.6% over the past 10 years
  • 9.4% over the past 25 years
  • 10.0% over the past 50 years
  • 10.0% over the past 100 years

Those returns include dividends being reinvested.

If you were able to invest $2,000 every year, assumed a reasonable 8% return, you can expect to have:

  • $31,000 after 10 years
  • $99,000 after 20 years
  • $245,000 after 30 years
  • $560,000 after 40 years

And that’s just $2,000 every year. If you could save and invest $6,000 a year — that’s $500 a month — you would have almost $1.7 million after 40 years. That’s based on $500 a month; that’s less than $17 a day. Thing about all the ways you might frivolously spent $17 a day.

Think about how much you spend on coffee, lunch at restaurants, and drinks with friends. Food for thought.[1]

Footnotes

[1] S&P 500 Return Calculator, with Dividend Reinvestment – DQYDJ

Where should I start if I only have $500 to invest, and only two days a week in which to monitor my investments?

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