£5,000 in savings? Here’s how I’d start investing in FTSE shares today

Based on his own experiences, Paul Summers reflects on the steps he’d take if he wanted to begin investing in FTSE stocks today.

| 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.

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.

Investors will argue about which UK stocks to buy until the cows come home. But I think there’s one thing all would agree on — the best time to start buying FTSE shares is as soon as possible!

Armed with £5,000, here’s how I’d action that advice.

Laying the foundations

First, I’d open an account that would actually allow me to buy shares. In my view, a Stocks and Shares ISA is ideal. This means I won’t pay tax on any profit I make from my investments. Over time, this could amount to many thousands of pounds.

Should you invest £1,000 in Vodafone right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Vodafone made the list?

See the 6 stocks

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Second, I’d work out what my financial goals are. Having targets in mind should keep me motivated in periods of stock market malaise.

Choices, choices

I then need to think about what I want to buy.

There are many ways to make money in the stock market. Some people like the idea of owning high-growth companies. Others prefer those that pay out cash to their owners in the form of dividends.

Some people prefer not to pick stocks at all. They ask a professional fund manager to do so on their behalf, albeit for a fee.

Another option is to invest in low-cost index trackers that track the return of the market. This means I can never outperform. But it also means I won’t underperform either.

I actually use a combination of all of the above!

Quality stock

An example of an individual company I have a stake in is Games Workshop (LSE: GAW).

The fantasy figurines maker has a dominant hold over a niche market. Hobbyists have been spending an lot of cash on Warhammer 40,000 products in recent years, placing a rocket under revenue and profit — and the share price. I would have more than doubled my money if I’d invested five years ago!

Created with Highcharts 11.4.3Games Workshop Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL6 Apr 20203 Apr 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '2520212021202220222023202320242024202520252.5k5k7.5k10k12.5k15k17.5kwww.fool.co.uk

Having signed a deal with Amazon for films and a TV series, I’m confident there’s even more growth ahead.

Games also has a good record of paying dividends. That passive income can never be guaranteed. But the cash I do receive can then be used to supplement my monthly salary, reinvested back into the company or used to buy other stocks.

That third option brings me to another important point.

Slow and steady

As a Fool, I’m committed to investing over the long term. Getting rich quick would be lovely, of course, but attempting to do so would probably involve going all-in on one stock. I think that’s a very risky strategy that could see me lose a lot or possibly all of my savings. At the least, it could prove incredibly stressful. Shares can be very volatile.

So, even though I really like Games Workshop, I wouldn’t throw all of my £5,000 at the company. For one, the shares are command a premium valuation. If sales disappoint, the share price could tumble.

Instead, I’d build a portfolio of great investments. Spreading my cash around different sorts of companies may help to mitigate any damage in the event that a few don’t perform as hoped.

And let’s not forget that I can add to the initial £5,000. Barring a disaster, the more money I can put to work, the greater my nest egg might be in time thanks to the not-so-secret investing sauce that is compounding.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers owns shares in Games Workshop Group Plc. The Motley Fool UK has recommended Amazon and Games Workshop Group 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Dividend Shares

Of the 20 highest-yielding FTSE 100 stocks, this is my top pick

This FTSE 100 stock currently offers a yield of 6.4%. But Edward Sheldon believes it’s capable of providing share price…

Read more »

Investing Articles

Could Tesla’s share price jump over the next 12 months? These analysts think so!

Tesla's share price has fallen by almost a third since 1 January. But optimism is high that Elon Musk's company…

Read more »

Investing Articles

I asked ChatGPT where the FTSE 100 will be in 6 months: here’s what it said…

Let’s be realistic, ChatGPT can’t predict the future. But it did do a good job of compiling data from brokerages…

Read more »

Investing Articles

Could the Rolls-Royce share price hit £10?

The Rolls-Royce share price has taken most analysts by surprise with almost everything going right for the British engineering giant.

Read more »

Investing Articles

4 REITs Fools own for passive income

REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »