It does not necessarily take a lot of money to start buying shares. But it does take some thought about what moves to make, to try and do well.
The end goal may seem easy: building wealth. After all, that is why most people invest. But there are many, many different ways people try to do that in the stock market – and some destroy rather than build wealth.
Done the right way, though, and even a modest starting point like £280 can provide a possible foundation for future stock market success.
Being smart about objectives and means
It helps to be realistic. As a starting point, simply aiming not to lose money can be a helpful place to begin thinking about the stock market.
That may sound surprising – after all, if investing is about making money, surely simply not losing it is an unambitious goal?
But my point here is less about an actual financial goal (though that can help) and more about learning how to balance risks and potential rewards. When someone decides to start buying shares, they can easily focus too much on the rewards side of the ledger, not the risks.
Learning the discipline of careful investment with due regard for risks is important. Even with £280, it is possible to reduce risk by diversifying across a couple of different shares.
On top of that, though, learning helpful mindsets about risk and reward matters.
Costs matter too
Speaking of a ledger, even in a hypothetical sense, raises another important point.
The returns shares may make, through capital gain or dividends, could help an investor earn money with their £280. But other things could eat into that. Capital losses are one, underlining again the importance of choosing the right shares.
But another item on the ledger is costs like fees and commissions.
That is why choosing the right Stocks and Shares ISA, share-dealing account, or share-dealing app can be important when it comes to overall return, especially with a relatively modest sum like £280.
Thinking about how to start
Given all that, having set up an account for buying shares and put the £280 into it, how might a novice actually get started?
One share I think new investors should consider is asset manager M&G (LSE: MNG).
The FTSE 100 financial services giant operates in a market with very high demand that is likely to last over the long term.
That can be good in terms of possible customer spend – but it also usually means lots of competition. Asset management is no exception in this regard.
That is why when investing I look for a company to have some sort of competitive advantage that can help set it apart from rivals.
From M&G’s brand to its customer base in the millions and long experience in financial markets, I think it does well in this regard. Still, one risk I see is turbulent financial markets leading clients to withdraw funds. That could lead to an outflow of funds, hurting M&G’s profitability.
Overall, though, I continue to think M&G has a lot to like about it. Not least a 7.7% dividend yield, meaning its shares offer passive income potential.
