With a spare £300, here’s how I’d start investing this November

There is often some reason why the present seems not quite the time to start investing. Maybe it feels appealing to wait for better market conditions or more money.

But endless procrastination is not a typical hallmark of successful wealth builders.

If I had never dabbled in the stock market before and had a spare few hundred pounds, here is how I would start my investing journey right now.

Understanding how shares work

To begin, I would get my head around how the stock market works. For example, what drives long-term success for a company, how could I value shares, and what mght be the right balance between risk and reward for a new investor?

The answers may be different for each individual. However, learning how the stock market works could help me get ready to start buying shares.

Setting up a dealing account

I would also want to have a practical way to buy shares when I am ready to start. So I would set up a suitable way to do that, for example a share-dealing account, or Stocks and Shares ISA.

Starting on a limited scale

I think investing with limited funds at first can be a better idea than it might seem.

After all, like most activities, there is a learning curve when it comes to buying shares. Putting a fairly modest sum at risk means that any mistakes need not be as costly as they would be when larger sums have been committed.

Getting a diversified portfolio with £300

But there are some challenges too. For example, one risk reduction method used by old and new investors alike is diversification. As the name suggests, that means not putting all one’s eggs in the same basket.

That can be challenging when investing smaller sums. Transaction fees add up and some individual shares trade for hundreds of pounds apiece (although in the UK market this is fairly uncommon).

So I would consider buying shares in an investment trust rather than focusing solely on individual company shares. Such funds – F&C and European Assets Trust are examples – buy into a wide range of companies. By owning shares in them, I can get some benefit of that diversification.

I could also buy individual shares by spreading my £300 across two or three different companies.

Hunting for quality

Whether I chose to start off by buying shares in an investment trust, individual companies, or a combination of both, some of the same principles would apply.

I would be looking to buy shares that I felt had excellent long-term potential and traded at an attractive price.

Rather than focusing on potential gain, I would consider how to reduce the risk of losing money. So I would stick to well-established, proven, profitable companies.

That is not a guarantee of success, but sticking to blue-chip shares on sale could hopefully help me avoid some of the pitfalls lurking in the racier corners of the stock market.

The post With a spare £300, here’s how I’d start investing this November appeared first on The Motley Fool UK.

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C Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.