If you earn income, you should be saving and investing. Yes, it really is that simple. The single most important rule of saving and investing is to start saving and investing. Establish the habit early on and putting aside money for investing becomes just another routine "must do" like paying the rent or the electricity bill.

IN PICTURES: Learn To Invest In 10 Steps

More Money = More Options
Once you begin, you will see that there is a simple reality in the investment world - the more money you have, the more options you have. If you have millions of dollars to invest, the world is your oyster and you can invest in almost anything you wish. For us regular people, though, our options depend on how much we can put aside each month. (There are a lot of options for investors who hate the hassle of investing. We go over some that will help your financial future in Hate Dealing With Money? Invest Without Stress.)

If You Have $50
Folks who can put aside $50 a month may think that they have too little to invest, and that nobody will want their business. Not true!

Admittedly, $50 a month does not buy a lot of options initially, but that is no reason not to start. The first step at this level is opening an online savings account. Have your $50 deducted straight from your account every month so that it becomes a habit, and build a little nest egg. Do not look at this savings account as the "goal". This is simply your first foothold into the investing world.

Your best bet at this level of investment is mutual funds, but many mutual fund families have minimum investments of $2,000 or more. Do not be discouraged. First of all, there are numerous fund groups that have lower minimums - $1,000, $500 or sometimes even less. You can start by using screeners at sites like Morningstar.com or Kiplinger for mutual funds with low initial requirements.

Second, almost every fund group will offer you a lower minimum if you commit to a monthly automatic purchase program. These programs usually have a minimum level of $50 a month; the money is automatically deducted from your account and used to buy shares of the mutual fund(s) you select. (Money is tight when you're young, but don't let that stop you from pursuing future riches. Learn more in How To Invest On A Shoestring Budget.)

If You Have $200
At $200 a month, your options get more interesting. Not only can you invest more in mutual funds, or invest in more than one fund, but you can also meet those minimum levels much faster.

Individual stocks also become more accessible at this level. Many companies offer what are called direct investment programs where you can buy stock directly from the company (or through an intermediary) for no commissions. These are real companies - Microsoft (Nasdaq:MSFT), Dell (Nasdaq:DELL), Nike (NYSE:NKE), Pfizer (NYSE:PFE), Disney (NYSE:DIS) and Coca-Cola (NYSE:KO) as well as hundreds of other companies.

ShareBuilder acts more or less like a no-frills stockbroker, but in exchange for a regular investment commitment (like $100 a month), you get a less punishing commission than you would pay at a regular broker. With services like ShareBuilder and direct purchase programs, you can establish a portfolio of a couple mutual funds and a couple stocks in a relatively short time.

If You Have $500
If you can put aside $500 a month, there are not too many things off limits to a normal investor. With only a few months of saving, you can clear the minimum investment amounts for almost any mutual fund aimed at retail investors. You can also serious consider "regular" equity investing - that is, opening a brokerage account and buying and selling stocks without any sort of commitment to scheduled purchases. At this level you can also think more about diversification (multiple styles of mutual funds, including bond funds) and taking on more risk.

Don't Forget Your Employer
Many companies offer employee retirement or investment plans like 401(k)s or direct employee stock purchase plans, and you should take full advantage of these. Don't have so much deducted from your paycheck that you struggle to make ends meet or have to fall back on credit cards, but if you have extra money at the end of the month you should seriously consider increasing your contributions to these plans.

Investing through an employer's plan has several advantages. First of all, there is a tax benefit to doing so, as your contributions are deducted from your pre-tax income and taxes are deferred. Second, many employers match the contributions of their employees, so you effectively get free money. Last and not least, most 401(k) plans have mutual fund options where investment minimums are waived; so even if you can only contribute $50 or $100 a month, you can often invest in multiple mutual funds with no fear of minimums.

For those who are self-employed, there are other options to consider as well. Special retirement investment options like SEP-IRAs and Keogh plans are available to self-employed workers and these plans can allow you to contribute a significant amount of your pre-tax income. (President Obama has proposed creating a new type of IRA designed to help Americans without access to a company retirement plan invest easier. What makes this new idea so different, and how does it work? Find out in What's The Deal With An Opt-Out IRA?)

Anyone Can And Everyone Should
If you can pay your bills and clear $50 a month, you can save and invest. At the low, low price of $50 a month, plenty of mutual funds are at your fingertips and as you manage to put more aside each month, even more options come into view. Save $50 a month and earn a market rate of return (8%), and you will have almost $9,500 in ten years. That is a goal that is well worth a little time and effort.

Catch up on the latest financial news in Water Cooler Finance: Buffett Speaks Up, AIG Deal Collapses.

Related Articles
  1. Personal Finance

    How to Job Search While You're Still Employed

    The best time to look for a new job is when you already have one.
  2. Mutual Funds & ETFs

    5 Mutual Funds that Hold Berkshire Hathaway Stock

    Discover the top five mutual funds most heavily weighted with Berkshire Hathaway stock, and the percentage of their assets dedicated to BRK.
  3. Mutual Funds & ETFs

    Comparing ETFs Vs. Mutual Funds For Tax Efficiency

    Explore a comparison of mutual funds and exchange-traded funds, or ETFs, and learn what makes ETFs a significantly more tax-efficient investment.
  4. Mutual Funds & ETFs

    4 Mutual Funds that Hold Tesla Stock

    Obtain information on the four mutual funds that have significant allocations to Tesla Motors, Inc. in their major portfolio holdings.
  5. Mutual Funds & ETFs

    4 Mutual Funds that Hold Apple Stock

    Discover mutual funds offering the most substantial percentage of holdings in Apple, Inc. stock that investors can use to get significant exposure to Apple.
  6. Mutual Funds & ETFs

    Top 5 Precious Metals Mutual Funds

    Obtain information and analysis of some of the top-rated and most popular mutual funds that offer investors exposure to the precious metals industry.
  7. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  8. Mutual Funds & ETFs

    Top 5 Bear Market Mutual Funds

    Discover five bear market mutual funds that investors can turn to for generating maximum capital appreciation during a bear market.
  9. Mutual Funds & ETFs

    4 Mutual Funds to Consider If Interest Rates Rise

    Learn what mutual funds will perform best if interest rates rise. Interest rates can rise due to inflation or to an improving economy.
  10. Personal Finance

    How To Get That Entry-Level Financial Analyst Job

    Landing a job as a financial analyst takes study, strategy and a lot of hard work. Here's how to hone your competitive edge.
RELATED TERMS
  1. Sticky Wage Theory

    An economic hypothesis theorizing that pay of employees tends ...
  2. Equity

    The value of an asset less the value of all liabilities on that ...
  3. Series 6

    A securities license entitling the holder to register as a limited ...
  4. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the ...
  5. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...
RELATED FAQS
  1. Can mutual funds outperform savings accounts?

    A mutual fund can – and should – outperform a savings account. In most cases, it should not even be a close race. Savings ... Read Full Answer >>
  2. Can mutual funds invest in private companies?

    Mutual funds can invest in private companies, which may come as a surprise to many investors. It is rare for a fund to have ... Read Full Answer >>
  3. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  4. What action is the SEC likely to take on 12b-1 fees?

    The Securities and Exchange Commission (SEC) may take action to impose greater regulation on how 12b-1 fees are used, or ... Read Full Answer >>
  5. What is considered a reasonable 12b-1 fee?

    A reasonable 12b-1 fee is generally considered to be 0.25% of the assets of the mutual fund. The maximum amount allowed for ... Read Full Answer >>
  6. What are some of the most common mutual funds that give exposure to the retail sector?

    There are a number of mutual funds that give exposure to the retail sector. Three of the most popular funds are the Fidelity ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!