Here’s how (and why) I’d start buying shares with £25 a week

Our writer uses his investment experience and current approach to explain how he would start buying shares on a limited budget for the first time.

| 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.

Smiling white woman holding iPhone with Airpods in ear

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.

There are lots of reasons (or excuses) people use to put off buying shares, from a lack of spare money to needing more time to do research. But time, as they say, kills all deals. If I had never invested before and wanted to start buying shares for the first time on a limited budget, here is the approach I would take. In fact, it is the approach I do take as an investor currently!

Why starting small can beat waiting for size

Before I get into the details of how I invest, let me explain two reasons why I think it can make sense to start buying shares on a limited budget.

The first is that, although people start investing hoping to make money, the path is not always a smooth one. Beginners’ mistakes can be painful but valuable lessons in investing. Making such mistakes with less money at stake can make them less painful — but just as valuable.

Should you invest £1,000 in M&G 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 M&G made the list?

See the 6 stocks

A second reason is that life often throws up the need for money. Waiting until one has saved up many thousands of pounds before investing could mean waiting a very long time in some cases – and potentially missing out on great stock market opportunities in the mean time.

A practical approach to investing

So, how would I start buying shares in practice?

My first move would be to investigate the wide range of share-dealing accounts and Stocks and Shares ISAs available, to select one that suited my own individual needs.  

I would start putting in regular contributions. A weekly £25 adds up to £1,300 per year. My approach is to invest what suits me, although I aim to have some consistency as I think that is habit forming.

With the ability to buy shares, I would get to grips with ideas like how to value them.

Then I would look at companies I understood and that I felt had strong long-term commercial prospects to decide whether I wanted to buy them. Even with lots of research, what seems like a promising firm could turn out to disappoint. So I would start buying shares the way I meant to go on (and in practice do): by diversifying across a range.

Here’s an example

To illustrate, one share I think investors with an eye on passive income potential should consider buying: M&G (LSE: MNG).

I like companies that operate in markets with a large number of potential customers and big revenue potential. That is certainly true of the asset management space in which M&G operates – and I expect that to be true over the long term too.

Created with Highcharts 11.4.3M&g Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

M&G can compete thanks to some particular strengths. It has a well-known and respected brand, helping it attract and retain clients. It has an established base of clients, with over 5m retail and 800 institutional customers. It also has deep financial markets experience.

Still, one risk I see (and all shares have risks) is clients pulling out more money than they put into M&G funds, as has been happening lately in the main part of the company’s business (excluding its Heritage division).

On balance, though, I like the company’s potential relative to its share price. Its chunky dividend yield of 9.8% also appeals to me.

Of course, there are plenty of other passive income opportunities to explore. And these may be even more lucrative:

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.

C Ruane has positions in M&g Plc. The Motley Fool UK has recommended M&g 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.

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

More on Investing Articles

Investing Articles

£20K invested in Tesla stock last April is now worth…

Despite all the bad headlines lately, Tesla stock has put in a storming performance over a 12-month timeframe. Is this…

Read more »

Investing Articles

If a 40 year old invests £600 a month in a SIPP, here’s what they could have by retirement

With no retirement savings at 40, an investor could put £600 a month into a SIPP and grow its value…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »