Some people may be put off investing in a Stocks and Shares ISA because they think it’s just for the wealthy. But at The Motley Fool, we believe anyone with a little extra cash can benefit from setting money aside for the future. Thanks to modern investment platforms, it’s possible to start with as little as £50 a month.
A Stocks and Shares ISA‘s a fantastic vehicle for this, offering tax-free growth and shielding you from capital gains and dividend taxes.
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.
Should you invest £1,000 in Aviva right now?
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Start small, think big
Before investing, it’s crucial to have an emergency fund in an easy-access savings account. Investing in stocks carries risk, and nobody wants to be forced to sell at a loss if an unexpected bill lands. A good rule of thumb is to have at least three months’ worth of essential expenses saved before committing to the stock market.
Many ISA platforms, such as AJ Bell, Hargreaves Lansdown, Interactive Investor and Vanguard, allow low, minimum contributions.
Some even offer commission-free investing, making it cost-effective to invest small amounts regularly. With £50 a month, it’s now possible to purchase shares in an investment fund or an individual stock.
Buying individual stocks can be exciting and potentially rewarding in the long run but carries more risk. Some newbie investors may prefer to invest in a low-cost FTSE 100 or S&P 500 index fund, which provides instant diversification.
However, for someone who fancies trying their hand, picking individual stocks can be much more engaging. Starting with a strong, defensive company’s a smart move.
In my view, Unilever‘s (LSE: ULVR) a solid starter stock to consider. I hold it myself. This FTSE 100 giant boasts some of the world’s most recognisable brands, such as Ben & Jerry’s, Dove, Hellmann’s, Dove, Persil and many more.
I reckon Unilever is a great starter stock
Since Unilever sells everyday essentials, demand tends to remain stable even in economic downturns, helping new investors weather stock market volatility.
Unilever also has a long history of paying dividends, currently yielding 3.2%, with the board aiming for 5% annual increases.
Its global presence and diversified product range provide stability, though the company has faced criticism for spreading itself too thin. The board is addressing these concerns, but change takes time.
Unilever’s share price has risen just 3% in five years, with dividends on top of that. However, over the past 12 months, it’s surged more than 20%. The outlook’s more optimistic but, as always, past performance is no guarantee of future results.
Because every stock carries risk, building a diversified portfolio is essential. I’d aim to increase that initial £50 a month as soon as possible. First to £100, then £150, then £200. Expanding into sectors like technology, healthcare and financial services can further reduce risk.
Reinvesting dividends helps turbo-charge long-term growth. But the most important step? Getting started. With patience and consistency, those small monthly contributions can compound into substantial wealth over time.
