Here’s how I’d start (or continue!) buying shares with £500

Christopher Ruane, if he had his time again, would start buying shares the way he does now. Here he explains the approach he takes, on a limited budget.

| 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 some people who want to get into the stock market never actually start buying shares.

One is a lack of funds. But in reality it is possible to invest with just a few hundred pounds (or even less).

Another is a lack of knowledge. But, although experience can help, the way I am buying shares now is the same way I would if I had my first stock market moment all over again.

Should you invest £1,000 in Assura Plc 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 Assura Plc made the list?

See the 6 stocks

How I invest £500

When I have £500 to invest, what I do with it depends on how much else I may already have invested. That is because an important risk management principle is diversifying across different shares in case one (or more!) is disappointing.

So, as I already have a portfolio of different shares, I am happy to put £500 into a single share. But I do not – ever – put all of my money into one company. If £500 was all I had, therefore, I would spread it over different shares.

I want to invest efficiently, so I use a Stocks and Shares ISA. In some situations, I use a SIPP or may consider using a share-dealing account.

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.

What I am looking for

Before I start buying shares, I want to make sure I know as well as I can what I am getting into.

So I stick to areas I think I understand, meaning I am better able to assess a company’s position and prospects. If I do not understand an area, I can always take time to do some research and improve my knowledge of it before investing.

Next, I look for companies I think have a competitive advantage and a target market I expect to remain sizeable over time.

One mistake new and experienced investors alike can make is not paying enough attention to a company’s accounts. If it has lots of debt on the balance sheet, that can make it unattractive. Profitable companies have gone bankrupt before now simply because they cannot repay their debt.

I also look at valuation. A good business can make for a poor investment if I overpay for its shares.

Putting my money where my mouth is

One share I think exemplifies my approach is my holding in FTSE 100 asset manager M&G (LSE: MNG).

The market for asset management is large and I expect that it will remain that way for the long term (which is my investment timeframe, by the way).

With a strong brand, long asset management experience, and millions of customers in multiple markets, I see M&G as having competitive advantages.

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

It aims to maintain or raise its dividend per share each year (although in practice that is never a sure thing). With a 10% dividend yield, the share is a lucrative source of passive income streams for me.

Will that last? One risk I see is that customers pulling more funds out than they put in could hurt profits. In M&G’s non-Heritage business, that happened in the first half of the year.

I will be keeping an eye on that risk, as I do like the 10% yield!

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

Our best passive income stock ideas

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 »