How are those New Year’s resolutions holding up? Often people start January with a vague intention to start buying shares, but end up failing to make good on their goal.
One reason is the perceived costs involved. But buying shares does not have to require a lot of money.
If I could pull together a spare £750 and had never invested in the stock market, here are the practical steps I would take to start buying shares.
Why I’d bother
I think that it is worth explaining why I would start now rather than waiting to save up more money.
Life often throws us unexpected financial demands, so waiting until one has more spare cash can be a fool’s errand.
On top of that, I reckon starting on a fairly small scale means that the financial impact of a beginner’s mistakes is smaller compared to ploughing thousands of pounds into the market.
Getting ready to invest
To start buying shares, I would need some way to purchase them.
So I would set up a share-dealing account or Stocks and Shares ISA straight away.
That way, once I found some shares I liked the look of, I would be able to begin building my portfolio immediately.
Learning about the stock market
My next move as a novice investor would be to learn about how the stock market works.
It is one thing to look at a company like Games Workshop, Amazon or Spirax-Sarco and feel it has a great business model that could help make big profits in future.
But it is quite another to determine whether such a firm could make a potentially rewarding investment.
So I would take to learn about important topics such as how to value shares, the way to read a firm’s balance sheet and how to be a good investor.
Finding shares to buy
Using that newly acquired knowledge, my next step would be to draw up a list of shares I thought might offer me the right combination of business quality and value.
To reduce my risk if any one company disappointed me, I would build a portfolio spread across a number of different shares. £750 would be enough for me to invest in three or four different businesses.
Hold and buy
After I start buying shares, what would be my next move?
How about… nothing? Or almost nothing, at least.
I am not a trader but an investor. So I am looking for shares I can buy and hold for the long term.
I would still check how the businesses were performing occasionally, in case any changes had an impact on their investment case. I could also decide to put some more money into my portfolio to invest, if I had some to spare.
But mostly I would be sitting back and waiting for time to have its effect – and hopefully reward me for having found great shares to buy at a brilliant price!
The post I’d start buying shares with a spare £750 like this appeared first on The Motley Fool UK.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon and Games Workshop Group Plc. 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.
