Is there ever a right time to start buying shares? In general, my approach to this is that action beats words.
If I had never invested in the stock market before and had a spare £250 at the moment, here is why and how I would start buying shares this month.
1. Time and money
How long does it take to pick up the basics of investing and learn to be a brilliant investor?
The answer depends on the person concerned. But it can take years or decades.
It means that the sooner one begins investing, the longer the timeframe one has to learn from mistakes and successes, then adjust accordingly.
As a long-term investor, I am looking for shares I can buy to hold for decades. That gives the companies I invest in a longer timespan to show their true value. If I had started this journey earlier, my investing could have stretched over an even bigger timeframe.
2. Perils of market timing
Many investors seem to feel a temptation to wait until shares seem really cheap due to some event like a stock market crash.
That is known as market timing and doing it correctly is difficult at best, if not downright impossible. One reason some people never start buying shares even though they plan to is because they wait so long while doing nothing that other priorities pop up.
As the old saying goes, there is no time like the present.
Rather than try to time the market, I would be happy to buy shares at any moment if I could find great businesses whose shares were selling for less than I thought they were worth.
Right now, I think the UK market contains a lot of cheap shares. Businesses like British American Tobacco have a price tag equivalent to just seven or so years’ worth of earnings.
3. Starting as I mean to go on
But is £250 really enough to invest?
That depends on the objective. If I wanted to aim for a million, for example, investing just £250 seems unrealistic. I could start with that amount, but without adding substantially more later on, I would be very unlikely to become a stock market millionaire within my lifetime.
But what if my objective was simply to begin building a stock market nest egg as and when I had spare money to invest?
In that case, I think £250 would be enough to start buying shares. I could already choose some individual company shares or investment trusts to buy. £250 is enough to let me start applying some good investment practices from day one, like diversifying my money across different shares to reduce my risk if one of them performs poorly.
If had never invested before, this November I would be happy to open a share-dealing account or Stocks and Shares ISA and start buying!
