Here’s how I’d start investing for the cost of a weekend break

Is it possible to start investing with a few hundred pounds? Our writer thinks it is and explains why and how he would go about it.

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Juggling financial priorities can be tough and some things seem to get pushed down the priority list again and again. Take buying shares as an example. A lot of people mean to start investing in the stock market. But expenses like servicing the car or paying for a stag weekend get in the way.

A couple of hundred pounds might buy me a weekend break. But it could also be enough to allow me to start investing in shares.

Here is how.

Why not wait?

It may seem that, rather than start on a small scale, it makes sense to wait until one has a sizeable pot of cash to put to work in the stock market.

In some ways I think that makes sense. Minimum dealing fees and charges can end up eating into one’s investments, especially if investing on a relatively small scale. I would take time to research the share-dealing account or Stocks and Shares ISA that suited me best if investing a couple of hundreds of pounds.

In some ways, though, I actually think it is better to start investing today on a small scale than wait for some indeterminate future point when one hopes to have more spare cash available. That day might never come: there is always something to spend money on!

While I would hope to avoid beginners’ mistakes, at least if I made them with a few hundred pounds at stake they would be less costly for me than if I was investing with thousands.

Simple first steps

I would start by learning about how the stock market works.

Just because a business does well does not necessarily mean that it would make for a good investment. The price I pay matters, so I would learn about how to value shares.

Even a great company with a great share price can come a cropper unexpectedly, so I would diversify my holdings. With a couple of hundred pounds that can be a challenge, but it is possible. I could spread the money over two or three different companies, for example.

Different types of shares

Another way to get some diversification would be to start investing by buying shares in an investment trust.

That is basically a pooled investment. By buying a share such as City of London Investment Trust (LSE: CTY), I would be exposing myself to lots of different companies.

City of London owns stakes in blue-chip FTSE 100 businesses like AstraZeneca and British American Tobacco. If I had ethical concerns – for example about investing in a tobacco business – I could buy into an investment trust that catered better for my preferences.

While City of London is mostly UK-focussed, for example, some trusts are more international in outlook.

What I quite like about City of London is that its mainstream focus means its risks ought to be fairly close to those of the UK market generally. If the trust managers make bad choices, its shares could do worse than the broad market. But I would try to start investing with a strong aversion to risk.

As I learnt more, I could decide my own risk tolerance. I would start investing with a preference for less, not more, risk.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has positions in British American Tobacco P.l.c. The Motley Fool UK has recommended AstraZeneca Plc and British American Tobacco P.l.c. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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