it does not necessarily take a lot of money to start investing in the stock market.
In fact, it is possible to start buying shares with a modest amount of money. Here is how someone who is new to the stock market could get going with £5 a day.
Starting on a small scale
Over the course of a year, that would give the person over £1,800 to invest.
Simply by putting aside a small amount of money each day, they could aim to build a substantial portfolio over the decades to come.
For example, imagine that a 30-year-old starts putting £5 a day into the stock market and achieves a compound annual growth rate of 5% (from share price movements and dividends). By the age of 65, their portfolio should be worth over £134,000.
Getting started in the stock market
Some people like the idea of investing, but keep putting it off.
But it is possible to begin buying shares quickly.
Of course, getting into the stock market without understanding it is not a smart move. Thankfully, it is possible to get to grips with some basic yet important concepts like valuation and portfolio diversification fairly fast.
Before investing, one needs a way to do so.
So it makes sense to compare option such as share-dealing accounts, Stocks and Shares ISAs, and trading apps.
From dreaming to investing
The next move is finding shares to buy (and buying them!)
That may sound easy, but there are some traps for the unwary. For example, some new investors presume that a good business must make for a good investment.
But I mentioned above that valuation is an important concept. Paying too much for a share can mean that even a brilliant business makes for a bitterly disappointing investment.
I think someone who plans to start investing could do worse than paying attention to the wisdom of billionaire investor Warren Buffett.
Buffett likes to stick to well-established, sizeable businesses he understands and that he thinks have an excellent commercial potential not fully reflected in their current share price.
Long-term potential
In that vein, one share I think investors should consider is consumer goods company Reckitt Benckiser Group (LSE: RKT).
The Reckitt share price has moved up 21% so far this year. However, that still leaves it 14% below where it stood five years ago.
The company is still paying the costs of a disastrous acquisition in 2017. There is a risk that ongoing legal labilities will continue to eat into profits.
But the business operates in markets with high and ongoing demand. Its premium brands like Dettol and Vanish, combined with international distribution muscle, all help it to make money. I expect that will continue over the long term.
From a long-term perspective, I think Reckitt has bright prospects. And while I think all investors can benefit from taking a long-term view, the best moment to begin that is the first day one starts investing!
