The beginning of the year can bring some things into focus. An example is personal finances. I reckon many people think in January they ought to start investing. But by December, only some of them will have managed to do that.
If I wanted to begin buying shares for the first time in a way I could realistically afford, here is how I would go about it.
Setting a savings target
My first move would be to decide how much I could afford to save on a regular basis. One way to do this would be to set a regular target.
For example, if I put aside £5 a day, I would generate £1,825 to invest in a year. Different people have their own circumstances so, for some, a smaller sum might work better while others could aim higher than me.
An alternative approach would be to put aside the spare money I had left at the end of each week or month. The reason I would not do that is I know spending requirements are sometimes higher than normal. If I do not save consistently, I may not get into the habit.
Whatever approach I took, I would put the money into a share-dealing account, or Stocks and Shares ISA.
Getting ready
While money is necessary to start investing, I would also need to know what I wanted to buy. So I would learn about the stock market.
For example, I could start to read up on topics like valuation. When I look at a company such as Tesla with its market capitalisation of almost $400bn, how can I know whether it is overvalued or still undervalued despite the big number?
With thousands of companies listed on the UK and US stock markets alone, I would not try to do everything. Instead, I would focus on companies in areas I understand. That would help me assess their prospects. I see that as important when evaluating an investment opportunity.
Instead of focussing on potential upside, I would start investing by trying to keep my risks low, if possible. So I would look for shares in well-established, blue-chip companies that already have a proven business model.
For example, I own shares in Altria and Standard Chartered. Both companies have proven business models. Like all companies though, they face risks. That is why I would begin investing as I meant to continue – by diversifying my portfolio.
I’d start investing in 2023
It would take me some time to build up funds and find shares I thought suited my investment objectives. So I think patience is important for an investor.
But I would still be keen to start investing once I found shares I thought matched what I was looking for. It can be tempting to save for year after year hoping for a once-in-a-lifetime opportunity to come along. But rather than do that, I would start putting my money to work in the stock market as soon as I felt I had found some great shares to buy.
Already, on the first trading day of 2023, there are some shares I would be happy to buy for my portfolio at their current price.
