I’d start investing with just £500 like this

Our writer highlights a quality FTSE 100 stock that he’d buy today if he were just about to start investing on a limited budget.

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The era when investing in stocks was reserved for the well-heeled is long gone. Thanks to the smartphone revolution and the emergence of low-cost share-dealing accounts, people can now start investing with just a few hundred pounds.

In fact, there are actual advantages to doing so. One is that it reduces the risk of investing a sizeable lump sum right at the top of the market.

Take the S&P 500, for example. This US blue-chip index has been notching fresh records in recent days and is now at an all-time high. This means it could be due for a sharp pullback in the near term as investors look to bank profits after its strong run.

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So, even if I back the world’s best companies, I may still invest at an unattractive valuation. It might take a while for the market to recover lost ground, which would probably be stressful if I’m immediately down by a few thousand pounds.

Investing small amounts regularly — a strategy known as pound-cost averaging — would smooth out these natural ups and downs.

What’s more, I’d expect my returns to improve as I find my feet and become more experienced. Avoiding obvious rookie errors should come more naturally.

Get that ball rolling

My first move would be to open a Stocks and Shares ISA. Then I’d set out what my investing goals are and note my own risk tolerance.

Do I want to invest in growth companies to really try and grow my portfolio? Or do dividends from more established businesses appeal to me? Perhaps a balanced mixture of both?

Whatever strategy I plump for, I’d need to commit to diversifying my portfolio over time. This is crucial.

Timeless brands

If I was just starting out today, I’d lay solid portfolio foundations by investing in established companies that are profitable and pay dividends.

A good example would be Coca-Cola HBC (LSE: CCH). This isn’t the iconic US beverage giant itself, but its bottling partner operating across 28 countries in Europe and parts of Africa.

Created with Highcharts 11.4.3Coca-Cola Hbc Ag PriceZoom1M3M6MYTD1Y5Y10YALL29 Sep 201929 Sep 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

The Coca-Cola Company manages the overall brand strategy and supplies concentrates, while the FTSE 100 bottler produces and sells the products. These include CokeSprite, Schweppes, energy drinks from Monster Beverage, as well as various snacks.

Growth has been strong for years, with revenue rising from €6.5bn in 2018 to more than €10bn last year.

Created at TradingView

The firms is also solidly profitable, which has allowed it to grow its dividend by an annual rate of 10% over the past few years. The yield is currently just under 3%.

Created at TradingView

One risk is that inflation is still running high in many of Coca-Cola HBC’s geographies. This means penny-pinching consumers could trade down to cheaper alternatives or avoid some of the places where its brands are sold (restaurants, for example).

Despite this risk, I remain bullish. The company enjoys a very strong competitive position in its markets due to its exclusive relationship with Coca-Cola. And the deep portfolio of brands is tipped for steady long-term growth in emerging markets like Egypt, Nigeria, and Bulgaria.

Plus, as Coca-Cola inevitably adds more brands to its portfolio over time, this bottling partner is well-positioned for further success. I’d happily consider investing in the stock if I was just starting out.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p 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 10%, 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

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.

Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Monster Beverage. 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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