With nothing in the bank, investing in the stock market might be the last thing on some people’s minds. But if I had no savings, I would consider using £50 a week to start buying shares.
Here’s why and how I would go about it.
Why invest with no savings?
It might seem counterintuitive to start buying shares with nothing in the bank.
But a zero balance bank account can be a reality check that, for now at least, one’s financial endeavours have not necessarily been that successful in building wealth. By tucking money away regularly in the stock market, I would hope to build a portfolio of high-quality blue-chip shares.
That would hopefully give me some discipline and motivation to keep trying to grow my portfolio by continuing with my regular contributions.
On top of that, I might also generate some passive income in the form of dividends from shares I buy.
Is £50 a week enough to invest?
Some people think that, to start buying shares, it is necessary to have a large amount of money.
That is not the case.
In fact, I see some possible advantages to making a start in the market with a smaller sum rather than saving for years to have a big investment pot. One is that delay can lead to plans being abandoned as other spending priorities emerge.
Another is that, like many things in life, investing involves a learning curve. I would rather get some mistakes out of the way early on, with smaller sums, than wait to plunge into the market with a far larger amount at risk.
£50 a week soon adds up. In fact it would give me some £2,600 per year to invest. That is more than enough to start buying shares!
Deciding on a suitable investment strategy
But how would I actually get started?
My first move would be to set up a share-dealing account or Stocks and Shares ISA. That way, I would have somewhere to put my weekly contributions and be ready to start buying shares as soon as I found some I liked.
Next I would decide what I wanted to try and achieve.
For example, would my focus be on growth, dividend income or a combination or both? What risk level could I tolerate? Ought I to invest in individual shares or tracker funds that expose me to a basket of shares?
The answers will be different for each investor, based on their individual circumstances. Once I had come up with a strategy, though, I would start looking for shares to buy.
Focus on quality shares
Whatever my strategy, I would focus on shares in what I saw as outstanding companies I understood, with a share price I liked.
For example, in my own portfolio I have recently been buying JD Wetherspoon shares. I understand and like its business model and think the share price is cheap relative to the company’s long-term prospects.
I could be wrong, though. Inflation might eat into profitability, for example. That is why I always diversify across a number of shares.
I would do the same from day one if I was to start buying shares for the first time again today.
The post With no savings, I’d use £50 a week to start buying shares appeared first on The Motley Fool UK.
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C Ruane has positions in J D Wetherspoon Plc. 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.
