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.