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and Lose Weight: A simple guide for everyone," by Babe Lincoln. Copyright
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“I couldn’t wait for — Jonathan Winters
1 How to Make Money The easiest, safest, surest way to make money is to invest your extra cash over time in a diversified portfolio of high-quality stocks, always paying a price-per-share that is lower than average. This technique is called dollar-cost averaging. Small investors can reap the benefits of dollar-cost averaging by investing in a low-cost mutual fund. It works like this: You open your account with the minimum investment, generally between $3,000 and $10,000, then invest a fixed amount every month, let’s say $100, from the extra cash you’d otherwise spend on things you’ll never miss. Every month, your hundred dollars will buy a different quantity of shares. When the price of the shares is higher, your money will buy fewer of them. When the price of the shares is lower, your money will buy more of them. Over time, you will pay a price-per-share that is lower than average. It’s simple math. The key is to do this with money you’re sure you won’t need in the next five years. The market fluctuates, sometimes sickeningly, and it’s important to be able to wait patiently and not put yourself under pressure to sell. Keep your short-term, pay-the-bills-in-an-emergency cash in a money market account. Only invest the money you’re sure you won’t need anytime soon. When you open your account, take advantage of the option to reinvest the dividends and capital gains. That will help your investment grow more quickly. Then, every month, invest an additional $100. It’s not a bad idea to set up an automatic investment from your checking account. We all mean well. Over time, dollar-cost averaging will turn $100 a month in spare cash into something big enough to solve a real problem. It could help you buy a car, make a down payment on a house, pay for college, or give you the confidence you need to take a career risk. Dollar-cost averaging frees you from the stress of trying to time the market, and mutual fund investing frees you from the stress of trying to pick stocks. In good markets, you accumulate shares slowly and sleep through the night. In bad markets, you remember that you’re buying shares at a discount, kind of like a sale at Bloomingdale’s, and you fall right back to sleep. Next, you need a good, low-cost mutual fund.
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