Is £500 enough for a stock market beginner to start investing in 2025?

Mark Hartley considers how much a beginner needs to start investing in the stock market and examines other factors to be addressed.

| More on:

Image source: Admiral Group plc

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.

Many people still think stock market investing is reserved for the wealthy or well-connected in society. In truth, there’s never been a lower barrier of entry for investors from all walks of life.

Getting started no longer requires a large lump sum of savings to open an account. Nor does it require the expensive services of an advisor or broker. Anybody with internet access and a bank account can start investing with just a few pounds if they wish.

But one of the biggest limitations that keep the average person from investing is fear. 

People tend to fear things they don’t understand — especially when it comes to money. Trust in financial institutions has eroded since the 2008 financial crisis. Now, people are far less willing to part with their hard-earned savings.

Fortunately, another change has been the rapid rise of freely available information. Sorting through this information can be challenging but it’s there for those willing to learn.

What matters the most when investing is not so much the amount of capital available but deciding how to allocate it. The sooner one starts investing, the greater the eventual returns are likely to be.

Whether it be £50, £500 or £5,000, the most important thing is taking the first step.

Steps to getting started

  • Think long-term: ideally, it’s best to consider an investment strategy with a long-term view. Be it for retirement or buying a house, it should be approached in terms of decades, not months. This gives the investment time to compound and grow exponentially.
  • Assess risk tolerance: each person’s risk tolerance depends on their financial situation and how much they can afford to lose. High-risk investments are best left to those who can afford the loss.
  • Define a budget: making regular contributions is the best way to build an investment. The more the better, but be realistic. Decide on a weekly or monthly amount and stick to it.

Picking stocks

With a solid plan in place, it’s time to pick stocks. When starting, it’s best to stick to well-established companies with a long history of stable growth. These are usually low-risk-but-low-reward stocks like Unilever or Diageo.

Consider the insurance firm Admiral Group (LSE: ADM). It operates across Europe and the US, offering motor, household travel and pet insurance along with personal loans. This diversity helps protect it against a downturn in any single country or area of insurance. It pays a reliable dividend with a yield of around 4%.

The stock dipped through 2022 and hasn’t fully recovered, up only 17.5% in the past five years. Rising inflation has subdued the UK insurance sector and continues to pose a risk to the stock, along with stiff competition and regulatory concerns.

But before Covid, it made solid and steady gains, growing at an annualised rate of 8.5%. 

It’s now up 53% since its five-year low of £17.35 in July 2022. While the growth is promising, it’s pushed up the company’s price-to-earnings (P/E) ratio to 20.3, which could limit room for further growth. 

Still, future cash flow estimates indicate it’s trading at 51.3% below fair value. Overall, I think it’s worth considering as a beginner stock due to its solid earnings, long-term potential and established nature.

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.

Mark Hartley has positions in Diageo Plc and Unilever. The Motley Fool UK has recommended Admiral Group Plc, Diageo Plc, and Unilever. 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

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

Time to buy Nvidia shares before fresh all-time highs?

Nvidia shares began 2025 at an all-time high before a big drop in the last week or two. Our writer…

Read more »

Investing Articles

A top FTSE 100 share to consider for a Stocks and Shares ISA starter portfolio!

While not without risk, a lump sum in this FTSE 100 trust could prove a great way for Stocks and…

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

I asked ChatGPT to name the best 5 UK shares to build wealth over 50 – and here they are!

Harvey Jones is looking to build a balanced portfolio of UK shares to fund his final years, and asked ChatGPT…

Read more »

Investing Articles

£10k invested in Scottish Mortgage shares after the DeepSeek crash is now worth…

Harvey Jones thought his Scottish Mortgage shares were heading for a bumpy ride when DeepSeek emerged last month. Then he…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

1 ex-penny stock up nearly 400% in my Stocks and Shares ISA! 

This writer is starting to take notice of a small-cap stock that is 'up' significantly in his ISA portfolio over…

Read more »

Investing Articles

The FTSE 100 index hits new highs! But will Legal & General shares outperform it in 2025?

Legal & General's share price has rocketed almost 8% so far in 2025. Can it continue to outstrip the surging…

Read more »

Investing Articles

Up another 8% in a week! So what’s stopping me from buying IAG shares? 

Harvey Jones is desperate to add high-flying IAG shares to his portfolio before they climb even higher but there's a…

Read more »

Happy couple showing relief at news
Investing Articles

The Bank of England’s slashed its growth forecast but the FTSE 100 doesn’t seem to care!

On the day the UK’s central bank halved its forecast for growth in 2025, the FTSE 100 reached a record…

Read more »