How to turn $100 into a six-figure nest egg

Black Enterprise, Oct, 1996 by Stephanie Gallagher

2. Successful investors invest smartly and regularly. Successful investors do not expect to hit home runs with their investments every single time. They know that one home run plus lots of strikeouts adds up to a lot of time on the bench. To succeed year after year, successful investors know they must keep their money growing. They use two methods to do this. First, they invest in stocks and/or stock mutual funds, recognizing that stocks are the only investment with the long-term power to grow their money year in and year out. Second, they invest regularly, a method guaranteed to work for everyone. Even spendthrifts can grow a fortune just by socking a way a little on the side every month. It's a powerful edge that's virtually guaranteed. You're always adding more to your principal; therefore, your nest egg can't help but grow.

3. Successful investors are patient. Often, it will take time for a good investment to show its true value. Successful investors understand this and, consequently, they don't get caught up in the daily ups and downs of the market. They know that to succeed in the long run, they have to be patient. Instead of jumping in and out of investments, trying to time the market perfectly, they buy investments that have good value and hold on to them until the market realizes that value. They don't expect to see instant growth and are not disappointed by temporary setbacks.

4. Successful investors do not marry investments.

To be successful at investing, you must be unemotional. No matter how much they like a stock or a mutual fund, no matter how promising that investment was when they first bought it, successful investors know that selling at the right time is as important as buying. It's hard to sell something that has done nothing but lose money, but successful investors don't try to recoup their losses. They know that if an investment is not panning out, holding on to it will not help. They cut their losses and move on.

Likewise, if an investment has made a lot of money, they know how to protect their gains. It's emotionally hard for someone to part with something that has done nothing but go up, yet that's precisely the best reason to sell. Nothing goes up forever.

RELATED ARTICLE: CUT COMMISSIONS ON INDIVIDUAL STOCKS

Smart investors know that using a full-service stockbroker can be a mighty expensive way to play the market. Fortunately, there are a number of excellent ways to invest in stocks without paying big commissions.

Ask for a discussion. As simple as it seems, few investors negotiate commissions with their brokers. Instead they accept the rates as set in stone and don't even bother to question them. This is unfortunate since most brokers will gladly discount commissions, especially if you have a large portfolio. Just ask; all you have to lose is a couple of hundred dollars in brokerage commissions.

Use a discount broker. Shop around. There's a slew of discount brokers who will execute trades at 25%-75% less than you'd pay with a full-service broker. You won't get the same level of research and advice you'd get from a full-service broker, but some discounters do offer services that come close, including free research materials, no-fee IRAs and branch offices. And many offer services you can't get from a full-service broker, such as no-commission trading on mutual funds. A few of the best: