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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?