It does not necessarily take a lot of money to start investing in the stock market.
Not only that, but I actually see some concrete advantages to beginning on a fairly modest scale. It means someone can get into the market quicker than if they spent years saving up more to invest. It also means that less is at risk for a beginner than if they started investing with more cash to spare.
Here is how someone with a spare £2K could start investing today.
Know your goal and make a plan
Different people invest for different reasons.
Some are hoping to benefit from the growth of an emerging company, while others are looking to earn passive income streams in the form of dividends.
Whatever your goals may be, it is good to be clear about them.
It also helps to think about how you will try to achieve them. When somebody starts investing, they need to learn about important stock market concepts like valuation and how to diversify a portfolio (even with £2k that is both possible and important).
With that knowledge in hand, they can start to think about the best strategy for finding the right shares to buy, in line with their goals.
Setting up a way to invest
To do that, they will also need to set up a practical way to put the money to work in the stock market.
That could be a share dealing account, Stocks and Shares ISA or trading app. Or, if the focus is on building a retirement pot, it may be a SIPP.
Finding shares to buy
When will the moment come, then, actually to start investing?
Some people find shares to buy immediately. But for others, it may take a while before they decide a particular share attracts them enough at its current price. I see no rush: just because there is money in the account does not mean it needs to be invested immediately.
One share I think investors should consider is Phoenix Group (LSE: PHNX).
The insurer is a massive force in retirement and long-term savings. As it tends to operate using its brands like Standard Life, it is not a household name itself.
But with around 12m customers, the FTSE 100 business is a financial giant. It has deep experience in its specialist area of financial service.
Combined with its large customer base, that has given it the ability to generate sizeable spare cash flows.
From an investing perspective, that is attractive because such cash flows can help fund dividends. Phoenix has grown its dividend per share annually in recent years and aims to keep doing so.
Its current dividend yield is 8.1%, meaning that for each £100 invested now, an investor will hopefully earn over £8 per year in dividends even before factoring in any potential future growth.
Dividends are never guaranteed to last at any company. One risk I see for Phoenix is that turbulent markets could cause valuations of some of its assets to fall. That could hurt its earnings.
Over the long run though, I think the business has ongoing cash generation potential.
