It can be tempting to think that one will start investing in the stock market at some point in future when earning more and having lots of spare cash.
In reality, such a day may never come.
Rather than waiting, if I wanted to begin buying shares for the first time, I would do it with the resources I had on hand already. Even a few hundred pounds would be ample to get me on the investing road and moving forwards.
One way to do that would be to put aside a single week’s wages and start investing with that.
Getting ready to invest
My first move would be to get the mechanics of investing prepared.
I would compare different share-dealing accounts and Stocks and Shares ISAs, then choose one that seemed to suit my own needs best.
I would also learn more about how people actually make money in the stock market.
For example, buying and selling shares often involves paying charges. So putting my money into shares then selling them a few days later could sometimes mean I ended up with less than I began with, even if the shares had moved up. My profit (and more) could be swallowed by costs.
Setting my objectives
Indeed, that is one reason I focus on long-term investing not trading.
By buying into high-quality companies with great businesses, I hope to benefit from their long-term success.
But just buying shares in a company that performs well is not necessarily enough to profit in the stock market. The price one pays is crucial.
So I would aim to buy great companies’ shares only when they were selling for an attractive price.
I would also consider my objectives. For example, would I prefer growth stories like Tesla or more income-focused shares such as Rio Tinto?
Building a portfolio
No matter how carefully I set my objectives and did my research, I could end up buying a share that did badly. Even brilliant companies can suffer, sometimes through circumstances outside their control.
That is why I would start investing as I meant to go on – with a diversified portfolio.
A week’s wages ought to allow me to diversify over at least a couple of different shares. But an alternative would be to buy shares in an investment trust like City of London or Scottish Mortgage that itself owns shares in dozens of different firms.
Focus on capital preservation
A common mistake people make when they start investing is buying shares they think could do very well, but ignoring the risks.
That is understandable: it is more enjoyable to dream of making money than losing it.
But that can be a costly mistake. Starting out in the stock market, there is a lot to learn, from valuing shares to learning how to read a balance sheet.
So my initial focus would be on reducing my risk rather than maximising my potential return.
That may sound counterintuitive. But if I lose money buying shares I will have less to invest in future. So I would take my time to research and pick carefully. I want to find winners!
