“Tell me how to invest in stocks!”, is a common statement heard from beginners to investing. This is even more common during a market crash when news headlines are discussing rock bottom share prices and financial volatility. But is this a good time to buy shares? Despite the negative headlines and worrying outlook, I think it’s a great time for beginners to stock market investing to learn. The stock market offers the opportunity for people from all backgrounds to make their financial dreams come true.
For richer, for poorer
It’s widely known that some of the world’s richest individuals made their fortunes from the stock market. Often, thanks to the gains realised from market downturns.
Warren Buffett is possibly the world’s most famous investor and multi-billionaire. His wealth today exceeds $73bn, and he has many words of wisdom for beginners to investing. Perhaps his most famous piece of advice is “Be greedy when others are fearful”. This perfectly sums up his attitude to investing. He takes care to weed out the best stock market bargains during times of strife when most investors are too scared to buy. The current coronavirus market crash is a prime example of a time when people are fearful.
Little money? Don’t worry
The old saying, it takes money to make money, is true when it comes to stock market investing. Although it’s never been easier for your average Joe Bloggs to get started, it comes at a price.
There are broker fees, a platform fee, purchase and redemption charges. Some UK shares also incur 0.5% stamp duty, and occasionally there’s also an inactivity fee if you don’t trade regularly. Some brokers waive their fees if you make a certain number of trades each month. In any case, you should be aware that part of your investment must be allocated to the fees and charges surrounding the transaction.
Nevertheless, this doesn’t mean beginners with little money can’t invest in stocks.
How to invest in stocks with little money
Anyone can open a Stocks and Shares ISA and use it to buy shares in their favourite companies. It’s a simple way to take control of your investments and you can start investing with as little as £25 a month.
A Stocks and Shares ISA can also be used to buy into index funds or investment trusts as an alternative to regular stocks and shares.
Index funds have relatively low fees and offer several advantages to beginners over buying individual stocks. A fund gives you ownership of a whole selection of stocks for your money, rather than just the one. You can choose a fund that tracks indexes such as the FTSE 100 index or FTSE 250, or you can opt to buy into a themed fund or specific sector, such as automation, environmental or the pharmaceutical sector.
There are lots of options for those who want to know how to invest in stocks, even for beginners with little money.
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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.