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The first is to have the $5,000 that is needed to reasonably open a regular
brokerage account in one year less time (three years) than straight saving
of money would take. If a person wanted to invest in stocks but had little
to no money to start, and began saving $100 per month in order to open a
brokerage account when they reached $5,000, it would take them 50 months,
or just over four years.
You needn't wait to invest when using a Drip portfolio. An investor can begin
to invest immediately, with as little as $100. We'll begin with $500 and
add $100 per month. An initial aim is to have the portfolio valued above
$5,000 within three years, or one year less time than it would take to save
that much money if a person were not investing it, but simply saving it in
order to invest four years later.
Not only does this show the value of investing what little money you can
as early as you can, but after three years the portfolio should hopefully
own stocks at a good cost-basis, especially compared to a person who saves
and then finally invests four years down the road -- four years after we've
begun.
The second goal is the long-term goal: Over twenty years, we aim to grow
the portfolio to $150,000. With an initial investment of $500 and adding
$100 per month, or $24,000 over twenty years, this would equal a return of
over 15.50% annualized, beating the historical annualized market return of
10.8% hands-down -- in fact, beating it by 43.5% per year. Our aim, of course,
is to even outperform our own goal.
Finally, the overall goal is to prove that beginning with very little money,
and investing an additional menial sum each month, anyone can grow their
savings into something valuable and meaningful. It doesn't take a molecular
scientist to build something. It takes diligence, patience, and Foolishness.
The stock market was created so that businesses could build value over time,
and so investors could as well. Buying stock directly from companies in bite-size
increments, over time -- without paying brokerage commissions -- is the best
way to utilize the strongest investment vehicle in the world. Doing it Foolishly
makes it that much better!
And a final note: Counting on inflation over the next twenty years, of course
we'll likely increase the amount of our monthly investment to well above
$100 at some point. As we do so, we'll account for that by increasing our
twenty-year goal as well.