What effect could just $50 a month have on your life savings? More than you think. Heres how to start or build upon your investing plan by making regular monthly investments (with as little as 50 bucks).

The story of the tortoise and the hare is particularly applicable as an investment metaphor. Instead of trying to time the market and buying stocks that could either make you a fortune or lose you everything, a far more lucrative option is just to set a steady course and automatically buy a set amount every month.

Although Wall Street seems like a place you can only enter with an absurd amount of money, you can actually do it for as little as $50 a month.

You might have heard of this strategy before – its called dollar cost averaging .

The idea is that you buy an investment — say, a mutual fund — for $50 a month, every month no matter what. Whether the fund is up or down is irrelevant because you buy on schedule. This way you dont worry about market timing, and you let the law of averages propel you to investment gains.

How dollar cost averaging works

As the mutual fund increases in value, your $50 purchases fewer shares. And when the fund loses value, you end up with more shares for the same amount. For example:

• September buy $50 of XYZ Fund at $25 per share. Total = 2 shares at $50
• October buy $50 of XYZ Fund at $30 per share. Total = 3.67 shares at $110
• November buy $50 of XYZ Fund at $15 per share. Total = 7 shares at $105
• December buy $50 of XYZ Fund at $25 per share. Total = 9 shares at $225

You can see the beginning and ending value of the XYZ Fund is the same at $25 a share, but because we bought a steady amount every month no matter what the funds value was, we ended up actually gaining $25 in the process.

You might say, “That’s great and all, but whats $50 a month really going to do in the end?” The answer: A lot.

How just $50 a month adds up

The power of compounding interest cannot be understated. The more time you allow your investment to grow without making a withdrawal, the more this effect can be seen.

If you stashed $50 a month under your mattress for 30 years, you would end up with $18,000, but if you invested it and earned just 5 percent, you would end up with almost $40,000 – at 8 percent, that figure becomes $68,000.

Retirement Statistics