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.

Pound coins for sale — 31 pence?

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.

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.

More on Investing Articles

Investing Articles

I was wrong about the Tesla stock price!

Tesla stock's been affected more than most by ‘Liberation Day’. But our writer has other concerns about Elon Musk’s company.

Read more »

Investing Articles

What’s happening to the Rolls-Royce share price now?

The Rolls-Royce share price has taken a knock from US trade tariffs, but it's still gained more than 50% in…

Read more »

Investing Articles

10 UK shares that are 50% or more off their 52-week highs

These UK shares have been hit hard. And Edward Sheldon believes there could be some opportunities for those with a…

Read more »

Man smiling and working on laptop
Investing Articles

Could IAG’s share price surge over the next year? These analysts think so!

IAG's share price has sunk, reflecting growing concerns over the impact of trade wars on airline profits. Is this a…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£10,000 invested in Apple shares last week is now worth…

Apple shares are down 18% over the past week. It’s a truly phenomenal downward movement, but investors may want to…

Read more »

Investing Articles

Are shares like Tesco a safe haven for investors?

Christopher Ruane sees a lot to like about Tesco shares. But does he see them as a safe heaven in…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

The 2025 stock market sell-off could be a once-in-a-decade opportunity to build wealth in an ISA

If a long-term investor has cash sitting in an investment ISA, now could be a good time to put some…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Is now a good time to start buying shares?

Stock market turbulence can be alarming, but it can also offer opportunity. Our writer considers whether now could be the…

Read more »