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Some good news: Today, there’s no excuse not to get started as an investor.
That wasn’t true in 1986, when I arrived in New York from London at age 23. Back then, Fidelity Investments and T. Rowe Price demanded $2,500 to open a mutual-fund account, far more than I could afford. Meanwhile, Vanguard Group required $3,000, and typically still does.
What to do? I got my start by purchasing six individual stocks through the National Association of Investors Corp. NAIC helped investors enroll in the dividend reinvestment plans of a limited number of publicly traded companies. I picked six stocks: insurers Aetna and Aflac, Gulf + Western, grocery store owner Hannaford Bros., McDonald’s and truck rental company Ryder.
Subsequently, I tried my hand at a few low-minimum mutual funds, including Twentieth Century (now American Century) Vista, which no longer exists. The fund made a rollercoaster ride seem like a gentle stroll through the countryside. Indeed, it was the only time I ever owned a fund that ranked as the top performer for the quarter. In 1992, I sold all these investments, so I could make my first house down payment, and since then have done almost all my non-401(k) investing through Vanguard Group.
Today, by contrast, there’s no need to scour the financial landscape for low-minimum ways to get started. Many folks make their first foray into investing through their employer’s 401(k) plan, which are now much more common than they were in the 1980s—and which don’t require any minimum investment.
What if folks don’t have access to a 401(k)? To get started as investors, they could turn to one of the many brokerage firms that’ll let you open an account with little or no money, and then use that account to amass shares in their favorite exchange-traded index funds.
According to the Federal Reserve’s triennial Survey of Consumer Finances, 58% of households were invested in the stock market in 2022, up from 32% in 1989. I assume the stock market’s strong performance over the past four decades has been the biggest driver of stocks’ soaring popularity. But falling investment minimums have no doubt also helped.
So, how did you get your start as an investor?
We have been out of town so I am just getting caught up here. Our story is very different than the ones here since we were from blue collar backgrounds and knew nothing about investments. I want to encourage anyone reading this in the same situation that you can learn, and it is easier than when we were younger and there was no internet. The 401k was new and our first “investment”, but I didn’t really understand it until the mid 1990s. We didn’t own any individual stocks until the Great Recession. We invested in our kids as someone said below. It was not to the detriment of our retirement, b/c we were always frugal, and when they got out on their own, we were able to ramp things up. We will be ok. Chris
I made my first investment with Merrill Lynch around 1980. I had scraped together the $2500 minimum and wanted to invest in their money market. Two weeks later my car needed an expensive repair and I called the broker to get my money back. It took him over a week to return my call. I was not happy with the speed of the transaction or the broker’s enthusiasm for holding my life savings. A few years later, I opened an account with Fidelity. I’ve been with them ever since.
I learned about investing from my Dad, but his experience was limited. My start was with three shares of IBM – one to me, one to my then wife, and one to us jointly from my then step-father-in-law. This occurred at the beginning of 1979. I designated all shares for dividend reinvestment, and very occasionally contributed a small amount of money to purchase extra fractional shares. My wife and I separated and finalized our divorce in 2008. When I sold my half of the stock (all of mine and half of ours) a few years later, the return was almost $7K. I learned a lot from watching this particular stock, noting dividends, splits, and ups/downs. I started putting that knowledge to work in the early 1980’s, when I opened and IRA and then later, when my first employer offered a 401(k) plan.
I graduated from college in ’85 and went to work for a small engineering company (100 employees). In 1987 the CFO set up the company’s first 401K plan through Fidelity. There were many investment choices, but the CFO (a friend) said that Contrafund would be a good one. I invested “the max” each year until 2018, then rolled that into an S&P 500 index fund and retired at age 60 in 2019 (and started reading this column). Who knew?
My first stock purchase was when I was 17 in 1974. Since I was under 21 had to convince my parents to open the account with them as custodian. Went with Merrill Lynch, there were no discount brokers at the time. I bought 50 shares of Sony at $5 a share. The commission was around $24. Why Sony, because back then they had the best color tv. Good enough for me. I still have the paper confirmation of the trade that they would mail to you. Around a year later sold my shares for a little over $10. At the time I was working in a grocery store making $2.25 an hour. I tracked the price every day and could not believe how easy it was to make money in the stock market. The Dow was around 600 at the time. That started my lifelong investing interest. Eventually I did learn stocks also do go down. Who would have known that!
I (that should at least read we!) first invested when I got married to a wife with an excellent job. We got married in 1980 and heard about money market funds–I think it was with Kemper. At the time they were paying in double digits–11, 12, 13%. It was in a graduate level theology class that I saw a classmate open his mail from Schwab and asked what it was. Soon after that, we opened IRAs at Schwab. Our first stocks were Exxon and IBM, both of which we still own. We figured that with plans for a life in Christian ministry, we needed to invest right away, because things wouldn’t be getting better! We also put the maximum into her available retirement plans at work.
By reading Random Walk on Wall Street one learns the winning index investing strategy and history has shown it to be 100% true
And 100% stock when starting your investment journey
My Father made a few stock investments, and from time to time he talked about stocks. He made it very clear that when I went to get the evening newspaper, it had to say Final Markets, in other words the closing price for the day. I was determined to learn how to buy and sell stocks. As a Co-Op student I worked in downtown Chicago, near the brokerage houses. Note, I do not recommend this, I used my tuition money and invested in stocks the broker liked, restaurants and cosmetics companies, around 1967. One stock went to zero and a couple of others had modest gains. The GOOD news I graduated on time! This experience then continued when IRA’s came along, and Roth’s came along. My only advice for young people is to INVEST in an Index like the S&P and always invest enough to get the FREE money from any company IRA plan.
Growing up in the 1950s in Cincinnati, my Dad had a cousin in Detroit. The cousin was employed in the auto industry there, and had no kids. While on one of our infrequent visits, the cousin took me under his wing and gave me a loose leaf notebook with info about the stock market and gave me a starting understanding on how to read the market results in the newspaper. Being a kid of that era, I started following Disney, but never invested, not having any funds yet. But it got me hooked on following the market. Many years later as a senior in college I took an investment course taught by a local attorney who was an adjunct professor. As part of that course we had to develop an imaginary portfolio and most importantly, write a paper on why we chose the various investments. My results and documentation only warranted a “B”, but that refined my interest. After graduation and employment, I started small when I had enough money to invest in a “round lot” since there was a premium charged for an “odd lot” back then. My career advanced, stock market premiums were lowered and virtually eliminated with the coming of the discount brokers. So I continued to invest, sometimes wisely, sometimes not so wisely. Even later on, 401(k)s were started and from that point the results were very positive.
Somewhere along the line I started following Jonathan Clements’ column in the WSJ and gained much great advice which greatly helped my discretionary investments.
Thanks so much to my Dad’s cousin, to that college professor, and to Jonathan!!
I was employed by a wonderful man where I worked in a local five person CPA firm when I first invested in a our firm’s SIMPLE IRA plan that had a limited employer match starting in the early 1990’s . A stock broker at our plan’s IRA custodian firm referred us a lot of work so the choice of the custodian for our plan was more of a business decision over a investment decision. The only somewhat low cost investment options available at the custodian on equity investments were index mutual funds and that is what I invested in. I subsequently rolled the SIMPLE IRA plan assets to a traditional IRA at Vanguard after the firm ended 28+ years later.
I have just recently finished reading Enought: True Measures of Money, Business, and Life that was written by John Bogle in the final part of his career and life. I owe Mr. Bogle a debt of gratitude for his persistence in the founding of Vanguard and their low cost index funds that upended the expensive investment costs that were typical in the past.
I was lucky to find my way to index mutual funds early in my investing journey.
I got my start with Wade Cook. Although he had his own financial and tax issues, his books and radio show got me interested in stock and options trading.
You’re right, it couldn’t be easier today to get started.
My very earliest start was when I was 18 and opened an IRA. That sounds great but I opened it at a bank and it basically held a savings account.
A few years later at 22 was my real start, following a steak dinner (yes one of those) by a firm that catered to military officers. Following their pitch I started dollar cost averaging the max into an IRA, using a diversified stock mutual fund they recommended – which carried a load and probably a commission.
One day I asked my rep if there wasn’t somewhere I could get a better return on my cash savings. For some reason the guy had a Fidelity money market brochure in his office and he handed me that by way of a short answer. Big mistake on his part, as he had just opened the door I soon walked out taking my investments with me.
My family purchase equity investments for new born children and add gifts as they grow up. I started purchasing on my own around 20, early 80s, there were a good number of mutual funds outside the big players willing to take my $300 initial deposit. Biggest regret, so little written on personal finance, how to really get started, before about 1985. I guess given the early 70s it’s not surprising.
Starting in 1979 my wife chose which individual stocks we should buy after setting some income aside in an emergency fund.
After a while we sold the stocks and used the proceeds to purchase mutual funds she selected.
In the early 80s a finance professor in an MBA class brought to class a box full of prospectuses for the recently launched Vanguard S&P 500 Index fund. I was hooked. Before that I had invested in an actively managed fund for a few years until I needed the money for a down payment.
I began researching investing in 1987, when I joined my employer’s new 401(k) plan and had additional cash in CDs that I wanted to invest in taxable accounts. A friend recommended Andrew Tobias’ “The Only Investment Guide You’ll Ever Need.” I read other books and financial magazines, and an NPR interviewee cited Fidelity and Vanguard as good fund companies. I tiptoed into the market with a defensive mindset, spreading $3,500 in non-retirement money among four funds: one each at Fidelity, Mutual Series, Neuberger Berman and Nicholas. Obviously, their minimums were tiny. As I have noted here before, I mailed in the checks in the last week of August 1987, not knowing the S&P 500 had peaked on Aug. 25. Two months later … my in-for-the-long-haul stance kept me invested, and I shoveled money in each month. Within a year, I had added an IRA at Vanguard, where I eventually consolidated our investments.
P.S., re Twentieth Century Ultra: I recall in the early 1990s noting in Morningstar’s report on the fund that two-thirds of the quarterly returns in the previous five years or so had been double-digit percentages.
My first exposure to investing was a whole life policy with American Express? Who remembers the very early eighties? Anyway I used to watch the plan’s results in the newspapers.
Then along came my first child and we invested in her, ie there was no extra money to invest.
At around that time I learned that term life insurance was much cheaper so that ended the whole life/investing stage in my life until 1998 when our orthopedic doctor practice sold the therapy practice and I had to do something with my pension and profit sharing accounts.
At that time I discovered Jack Bogle and Vanguard, and as they say, that made all the difference!
In 1977, Money Magazine. TRowePrice had full-page ads. Vanguard had tiny ads so I missed them. Called my brother-in-law, a bond analyst on Wall Street, for advice. He said TRP’s ‘Prime Reserve Fund’ would be a good place to start.
Falling CD rates peeked my interest in stocks during the mid-80’s. A smiling and dialing rep from IDS talked me into a couple of their bottom feeder investments in mid-1987, months before Black Monday. That experience, while shocking, taught me how quickly bad days turn around, and I’ve never been upset by volatile markets since.
I soon left IDS for (drum roll) Twentieth Century Ultra and some Janus Funds, riding the same roller coaster as Jonathan.
Seems like many HDers made some mistakes early on, learned from the experience, and ended up in a good place.
I forgot about Janus. I had Janus for many years – I think it was a case of buying last year’s winner. I don’t recall it being a big winner after I bought it.
I rode Janus all the way up in the 90’s, and all the way down in 2002. One of those funds had a 100% year. By the time the smoke cleared I considered myself lucky to have averaged about 8% over the life of the ownership. My son in law warned me to sell those funds around 2000; I should have listened.
In my early thirties, while in school preparing for a career change, I read a book published by the WSJ on personal finance that you had a hand in creating. That was the first time I thought about stock investing as something other than a regular report on the nightly news. When I got my first job with a healthcare company, I was primed to begin investing through their 401(k) right away and soon after in an IRA.
Life as a corporate employee comes with a workplace savings plan, but that’s not so for the sizable chunk of workers employed by small businesses. This Pew article says that 40% of small business owners don’t offer plans. So, the workers are not only missing an easy entry-point into investing, but also the encouragement and education about retirement planning that comes with the plan.
This situation makes your new personal finance education aimed at young people–described in a comment here–all the more important. As one of those folks touched by your efforts years ago, and continuing through HumbleDollar, I have a soft spot in my heart for the idea.
Jonathan, thanks – the message is so true. With direct deposit off paychecks it is so easy to set and forget a savings/investing plan.
I started similar to others with company stock (my first real employer was employee owned). When I switched to GE it was my first exposure to a 401k. The big step was helping to form an investment club (using NAIC guidance) with my older brother and some of his in-laws. I was the treasurer and found and utilized a “discount” broker out of Portland, Or. We had to make phone calls, and mail checks! We all researched individual companies for our investments. I learned so much from that experience.
There are many great options for a young adult to get started with small amounts of investment, including Vanguard, Fidelity, Schwab, Betterment … A small initial investment is a great graduation/wedding present for a young person in your life.
Another great option for a young child or grandchild that is embarking on their first jobs is to open a Roth IRA and fund it for them.
I would add to this discussion that for young folks in their 20s looking to get started
with investing, Vanguard’s Target Retirement funds offer a chance to invest in Vanguard’s index funds with just a $1,000 opening investment. A person could add $50 to a $100 a month to get started (most budgets can adapt to decrease spending by $50 a month) and then once the fund grows to $3,000, the person can transfer the $3,000 to the exact index fund desired. Vanguard remains the best place to go for index funds due to their low annual expenses and their history of being a pioneering leader in creating index funds.
I have convinced my children that successful investing for retirement takes no intelligence (they have their father as an example). A successful plan is as simple as picking the right target retirement date plan (ie the one closest to their 65th birthday) in their employer’s retirement plan and keep adding at least half of their raises each year.
After that forget it exists. Research has shown that once you have the right asset allocation (which one doesn’t even have to know what that is with a target retirement fund) benign neglect is your best “intervention”.
My start was my company’s ESOP – Employee Stock Ownership Plan in the pre 401k era. The free-money company contribution match was a huge positive, but company stock was the only investment option. I still own these shares.
I forgot about them. We had TRASOP and PAYSOP too.
My first effort was the employee discount stock purchase plan through payroll deduction.
Then at around age 19 I got hooked watching the ticker at a brokerage office and with no clue what I was doing started purchasing small amounts of cheap stocks – suggested by the broker. Not a good start. Playing those games continued until we implemented a 401k in 1982.
From then on investing was in the index funds we offered in the plan. However, over the years I added mutual funds of different types in a brokerage account. To this day there are only two individual stocks in our portfolio, my former employer and another utility.
The days long ago trying to beat the odds with individual stocks- largely unknown – and make a quick buck are over. These days I’m happy to see my RMD replaced with portfolio growth – and collect tax-free interest plus dividends.
You’re right Jonathan, today there is no excuse. I encouraged two of our grandsons to start investing and they put in a little as they get gifts, etc.