With a spare £280, here’s how I’d start buying shares this March

Our writer reflects on what he has learnt on the stock market to explain how he would start buying shares for the first time now on a limited budget.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Couple working from home while daughter watches video on smartphone with headphones on

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With a new season starting in March, it could be time for some spring cleaning. Some spring cleaning of one’s finances can be helpful too. New Year’s resolutions such as a plan to invest more or start buying shares may now have languished, unrealised, for a couple of months.

But it is possible to start investing in the stock market even with relatively modest funds.

If I had a spare £280 at the moment and had no stock market experience, here is how I would start buying shares in the coming weeks.

Setting up a dealing account

My first move would be to handle the administrative side of things.

So I would set up a share-dealing account or Stocks and Shares ISA to put my money in, ready to invest it when I found shares I wanted to buy.

With a few hundred pounds at first, dealing fees and commissions could eat into my funds. So I would take time to find the account that best suited my personal circumstances.

Learning about the stock market

Here is a question: is Apple (NASDAQ: AAPL) a good share to buy?

My answer would be: that depends. Not only that, but what might be a good move for one investor may not be right for someone else.

Apple does have a number of characteristics that I look for when buying shares. For example, the potential (and actual) user base for the sorts of products and services it sells is vast and is likely to remain that way.

Thanks to its brands, technology, and installed customer base, Apple has an advantage over competitors. That let it make a phenomenal $97bn in profits last year.

But a lot of other investors, including major shareholder Warren Buffett, also see attractions in the business model of the tech giant. Its current valuation is 28 times its annual profits.

So, although I like Apple as a business, I would not buy its shares for my portfolio at the current price. I simply think it is too expensive.

Concepts such as valuation matter enormously to one’s long-term performance as an investor.

So I would only start buying shares once I had learnt about how the stock market works, including concepts such as valuation.

Building a portfolio

Another important aspect to investing is managing risk.

Many people start buying shares focused on how much money they might make if things go their way. But even a brilliant-seeming investment can disappoint. So, savvy investors seriously assess possible risks, instead of just salivating about potential rewards.

One simple form of risk management is diversification: basically not putting all of your eggs in one basket.

Even with £280 I could – and would – diversify across two or three different shares, exposed to different parts of the economy.

Looking to the future

Over time, I think a few basic moves when I start buying shares could help increase my odds of financial success over the long term.

Just thinking about it would not do that, though. Taking action is necessary!

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 no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. 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.

More on Investing Articles

Investing Articles

Up 10% today, I think this FTSE 250 growth share could continue to surge!

Babcock International's flying after upgrading its full-year forecasts. I think the FTSE 250 defence share might just be getting started.

Read more »

Investing Articles

The AstraZeneca share price jumps 5% on today’s strong results – but is it too expensive?

Harvey Jones hails the brilliant long-term performance of the AstraZeneca share price, but wonders whether the FTSE 100's biggest company…

Read more »

Investing Articles

Is this my chance to buy Alphabet shares?

A big step up in AI spending at Google has investors nervous, but has it created an opportunity to buy…

Read more »

Senior woman potting plant in garden at home
Investing Articles

£10k in savings? Here’s how an investor could aim for a monthly second income of £1,200

Mark David Hartley considers how investors could build towards an early retirement plan with a second income from a portfolio…

Read more »

Investing Articles

2 cheap shares to consider buying in a £20k ISA for income of £1,000 a year

Harvey Jones loves buying cheap shares and says these two FTSE 100 stocks look tempting today, especially as they offer…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Is it worth me buying Lloyds shares for 61p after a 49% rise?

Lloyds shares have risen significantly from their one-year traded low seen last February, which could mean no value is left…

Read more »

Investing Articles

I think this FTSE 100 fashion stock could skyrocket in 2025

JD Sports has had a disastrous few months of losses but 2025 looks primed to be the year for this…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Down 13%, this FTSE gem delivers a 9.4% yield and looks 57% undervalued to me!

This is one of very few FTSE 100 stocks with a combination of a 9%+ yield, forecast earnings growth of…

Read more »