Many people have some vague plan to start buying shares at some point. But every real journey has to start with an actual step.
Putting off investing in the hope of having more spare cash down the line can just mean nothing ever actually happens.
If I had never invested and wanted to start buying shares before the end of this year, I think I could. If I had a couple of hundreds of pounds in Christmas money, I would use that to dip my toe in the stock market.
Little or large?
Is it better to start buying shares with a few hundred pounds, or a few thousand?
One of the problems investing a small amount is that trading fees and commissions can soon add up. That can be especially true if they have a minimum size.
On the other hand, I see some advantages to starting in a more modest way. It could mean I get going sooner, extending the timeframe for my investing career.
It would also mean the financial impact of any mistakes would be more limited. Of course, I would be investing to try and earn not lose money – but beginners’ mistakes are common in every walk of life.
If I could make errors on a small scale, I might learn some cheap but valuable lessons in how to succeed in the stock market.
Basic investing principles
Even with £200 I would follow some basic investing principles. I would start buying shares the way I meant to go on!
For example, I would reduce my risk through diversification. That could mean putting £100 into each of a pair of shares.
But an alternative could be to put the £200 into an investment trust that owns dozens of shares, like City of London Investment Trust.
My focus would be on finding brilliant companies with strong commercial prospects – but not buying their shares unless I thought the price was attractive.
Paying too much even for a strong business is a costly but common mistake people make when they start buying shares.
Getting ready to invest
Before choosing what investments suited me, I would set up a share-dealing account, or Stocks and Shares ISA so I would be ready to start buying shares as soon as I found the right ones.
How well could I do by investing £200? The answer would depend on how I chose to invest it.
Realistically, I would not expect to make substantial sums of money any time soon. If I made a profit of any size, I would regard that as a positive first step.
Investing is a long-term endeavour. With good choices and patience, even my £200 could end up turning into something far bigger.
Dipping a toe in the water would also let me learn some practical lessons. That could lay the foundations for more ambitious investing on a far bigger scale.
