Step 4: Start contributing and watch what happens
Automate your contributions if you can to help you avoid forgetting to make them and keep you committed to your goal. Check with your broker or retirement plan administrator to learn how to set up automatic contributions.
How much you’ll earn depends on what you invest in, how well it performs, and how long you hold it before selling. For our example, we’re going to assume you invest $5 every week for 35 years and you earn a 7% average annual rate of return over that time. In total, you’d end up contributing $9,100 of your own money. But your investments would be worth approximately $37,161. That’s over $28,000 in investment earnings.
And that didn’t come from speculating on what the next hot stock was going to be or trying to time the market. It was simple buying and holding, which is usually the best strategy for most investors. Suddenly, it doesn’t seem so cryptic, does it?
Of course, profit is never a guarantee in investing, but if you’re patient, avoid emotional buying and selling, and invest in solid beginner stocks or index funds, you’ll probably do pretty well over time.