I’d start buying shares with this pair!

Our writer uses his stock market experience to consider how he’d start buying shares for the first time if he had his time over again.

| More on:
Young Caucasian woman with pink her studying from her laptop screen

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.

One thing that can be daunting about trying to start buying shares is simply deciding exactly where to begin.

With thousands of different companies listed on the British and American stock markets alone, the options can sometimes seem bewildering.

But if I was about to start investing for the first time, here are a couple of shares that would be on my shopping list.


Consumer goods company Unilever (LSE: ULVR) has products in the homes of most people in Britain – and far beyond.

Focused on everyday products like shampoo and laundry detergent, the business benefits from strong ongoing demand from customers. Even when there is a recession, people wash their hair.

But lots of other companies also compete in these areas. How does Unilever set itself apart?

One way is by building premium brands such as Dove, often using proprietary technology and compelling advertising. That helps build consumer loyalty, meaning Unilever can charge a price premium even for mundane products.

That does not mean Unilever is risk-free: no share is.

It faces challenges such as ingredient inflation, spinning off its ice cream division without disruption to the rest of the business and shifting consumer tastes. All could hurt revenues and profits.

But overall I see this FTSE 100 member as a comparatively low-risk business.

It pays a quarterly dividend and yields 3.9%. So if I started buying shares by putting £1,000 into Unilever, I ought to earn £39 in dividends each year, if it maintains the payout.

That is never guaranteed: dividends can be cut. Then again, if the business does well, I actually expect Unilever to increase its dividend.

City of London Investment Trust

But while I might start buying shares by investing in Unilever, I would not only do that.

Why? A simple but powerful risk management technique for investors large and small is diversification.

That basically means not putting all my eggs in one basket.

After all, even the most promising looking business can run into unforeseen difficulties that hurt its business performance and its ishare price.

Diversifying can seem tricky if investing a fairly small amount of money. One solution can be buying shares in an investment trust. That is a pooled investment vehicle, meaning its managers buy different shares and I can effectively get exposure to them by buying a share in the trust.

Blue-chip focus

An example is City of London Investment Trust (LSE: CTY). This trust invests in dozens of mostly British blue-chip companies.

There are risks to a trust like this. Management fees eat into returns over time. If managers make the wrong calls, the trust may fare poorly.

In fact, in the past five years, City of London shares have lost 4%.

Set against that, though, is a 5% dividend yield – and a track record of dividend increases stretching back to the year England lifted the World Cup! Remember, though, that past performance is not necessarily a guide to what happens next, in the stock market as well as at Wembley.

The reason I would start buying shares by investing in a trust like this is because I feel following its progress with flesh in the game ought to help me learn about how the stock market works, while maintaining a risk profile I am comfortable with.

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 Unilever Plc. 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

Close-up of British bank notes
Investing Articles

£8 per year in extra income for life, for each £100 invested today? Here’s how!

Christopher Ruane explains how he would aim to set up extra income streams for the rest of his life by…

Read more »

Photo of a man going through financial problems
Investing Articles

With a £20K Stocks and Shares ISA, I’d target £1,964 in annual dividends like this

With an annual passive income target close to £2,000, our writer explains how he'd put a £20K Stocks and Shares…

Read more »

Illustration of flames over a black background
Investing Articles

Down 63% in 2024, what’s going on with the Avacta (AVCT) share price?

2024 has been a difficult year for many companies in the biotechnology sector, with the AVCT share price down heavily.…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Here’s how I’d invest £800 the Warren Buffett way!

Christopher Ruane learns some lessons from super-investor Warren Buffett he hopes could improve his own stock market performance.

Read more »

British Isles on nautical map
Investing Articles

Michael Burry just bought 175,000 shares in this FTSE 100 company

Scion Asset Management announced a $6.5bn stake in BP this week. But what could Michael Burry be seeing in an…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

£5,000 in savings? Here’s how I’d aim to start making powerful passive income today

With a cash lump sum to invest, this Fool lays out how he'd start making passive income. He also details…

Read more »

Investing Articles

Just released: our 3 top small-cap stocks to consider buying before June [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

My best FTSE 250 stock to consider buying now for passive income while it’s near 168p

This is a rare stock with a growing underlying business and a fat dividend yield – it’s worth consideration for…

Read more »