Those who had the fortitude to buy a stake in the business back in mid-March would now be sitting on a gain of close to 80%! Is there still time for new investors to get on board? Here’s my take. 

FTSE 250 winner! 

Back in July, the company reported sales across all parts of its business had bounced back following the easing of lockdown and “normalisation of shopping habits.” The fact procedures at its veterinary operations could now be performed also contributed.

Today, Pets announced the momentum seen in all its channels since reopening in Q1 had continued. As a result of achieving “double-digit” growth in like-for-like sales, management now believes underlying pre-tax profit for the full year (ending late May 2021) will come in “ahead of current market expectations.“

As updates go, I’m not sure existing holders could ask for anything more.

But is it still worth buying?

Given what’s going on in the world and the general nervousness seen in markets, speculating whether this company is worth buying now, however, is tricky.

Shares in Pets At Home were already trading on 27 times earnings before today. That’s expensive for any stock, let alone a retailer. It’s also a mighty price to pay considering the threat of further restrictions due to the spike in coronavirus cases.

As the company itself remarked today: “Covid-19 continues to create a number of material uncertainties around the trading environment, including the risk of a second lockdown.”

Should that second lockdown come, it’s possible we could see a second stock market crash in 2020. If this happens, there’s certainly the potential for the Pets share price to be hammered along with everything else.

After all, highly valued companies will often be the first to be jettisoned from portfolios. Moreover, panicked investors will usually look to sell what they can (i.e liquid FTSE 250 stocks), not what they should.

Resilient sector

For me, ascertaining whether Pet At Home is a great buy really involves asking how long you plan to hold it for. Based on the points above, I’d be tempted to at least pause before reaching for that ‘buy’ button, if it’s only for a few months. These holding periods are for traders, not investors.

That said, those thinking of holding for years rather than months could still do well. As the company itself stated, one of the attractions of the pet care market is its “inherent resilience.” These days, we consider pets as family members and spending on our furry friends has become less discretionary.

Like veterinary services provider CVS Group, I think Pets At Home is a great way of tapping into this trend. Let’s not forget there has also been a boom in pet ownership this year as a consequence of lockdowns. All those new owners will need to shop somewhere. 

No investment is free of risk. For those willing to buy and hold, however, I think this FTSE 250 stock could be a great addition to most portfolios. Just be sure to be sufficiently diversified elsewhere first.

The post The Pets At Home share price is on fire! Is there still time to buy this FTSE 250 winner? appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

With no vaccine in sight, there’s certainly no shortage of catalysts. The return of students to university campuses (despite ongoing restrictions on teaching) is one example. Concern surrounding the effectiveness of the ‘rule of 6’ is another. Now factor in temperatures dropping and people spending more time indoors. Oh, and did I mention Brexit was back on the political menu?

Stock market crash ahead?

But it’s not only events at home that are causing people to worry. The recent sell-off of tech titans such as Apple and Amazon in the US suggests that even the most coveted businesses may have peaked in valuation for now. 

Considering how far these stocks have bounced since mid-March, it’s understandable that investors have started banking profits. A victory for Democrat Joe Biden in the forthcoming election and the possibility of increased regulation and/or taxation of some of the biggest companies in the world could hit sentiment hard.

If all this makes for pretty grim reading, don’t despair. I actually think there are only two moves Foolish investors need to make in the event of a second market crash in 2020. 

Buy stocks…

Exactly what you buy naturally depends on what sort of investor you are. If you have limited time and/or energy to get down and dirty with individual shares, a selection of funds is the way to go. These can be passive (effectively managed by a computer) or active (managed by a professional investor). Personally, I like a combination of the two. That said, you should always check a fund manager’s track record for evidence that they have the ability to outperform the market. 

Of course, buying individual stocks can be a lot more financially rewarding if you can accept the risks involved. But as long as you pick great companies trading cheaply after the March market crash (relative to their average valuations over a few years), there’s a good chance you’ll beat the return you might get from holding a basket of funds. 

…do nothing

The second move is the hardest of the two. It’s even tougher if markets continue to fall. Doing nothing is tricky for us goal-obsessed humans. We’re wired to believe that the amount of success we achieve correlates with the amount of effort we put in. We’re also attracted to the idea of timing the markets perfectly, even though this is pretty much impossible to do consistently.

But strange as it sounds, you stand a better chance of getting rich from the stock market by doing as little as possible. In practice, this means not checking your portfolio too often. It also means limiting your news consumption so you’re less likely to buy or sell on an impulse and incur broker commissions.

If you simply can’t keep a distance from the markets, be productive with your time. Build a watchlist of quality shares you’d be willing to buy if funds allowed and their prices keep dropping. If, and when, panicked traders begin selling indiscriminately, you can be there to mop up the good stuff.

Stock market crash 2.0? Bring it on…

The post Market crash! The only 2 moves I think you need to make in another sell-off appeared first on The Motley Fool UK.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Apple and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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.

Then again, there are some sectors that simply scream ‘avoid‘ to me right now. Here are three that are unlikely to make you rich any time soon. 

No sweat

One set of businesses that I think will struggle more than most to recover will be gyms and fitness studios.

If reports from the US are anything to go by, many people do not intend to renew their memberships post-lockdown. It would seem a lot have simply become accustomed to working out in the park or at home. Either that or they’ve recognised the futility of shelling out money on a regular basis for something they don’t use all that often. With job insecurity rising sharply as firms adapt to the ‘new normal’, gym memberships are also a luxury most of us would be willing to forgo.

Of course, there will still be people who head back to their local gym, particularly those who miss the social and motivational aspects of a visit. Others will likely want to return in the winter months when the cold weather sets in. Then again, the possibility of a second wave coinciding with seasonal flu will surely make even the most dedicated gym bunny think twice.

It may benefit from reduced competition if other operators go bust but I’d continue to give Gym Group — one option on the UK market — a wide berth for now.  

High street fallout

Many retailers were already finding things tough before the coronavirus arrived on these shores. The lockdown and stuttering recovery in sales seen since could prove the final nails in many coffins. 

Certain UK stocks should be absolutely fine, of course. Supermarket titans Tesco, Sainsbury’s and Morrisons for example. A business specialising in low-ticket staples, like B&M European Value, should also thrive in troubled times. 

If you’re going to buy a retailer that sells more discretionary goods, however, I’d avoid anything that doesn’t already have a strong online presence and bulletproof finances. And even if they do have these, it’s important to ask whether they can be more resilient than their peers given the hyper-competitive markets in which they operate.

As such, I’d avoid stocks like Dixons Carphone and yes, even stalwart Marks and Spencer.

Bumpy ride

I don’t doubt that some airlines will adapt and recover from the coronavirus. Picking a winner at this stage, however, feels like a gamble. After all, the coronavirus story changes every day. This leads to huge volatility in stocks such as easyJet, Ryanair and IAG as investors struggle to accurately value them. 

There’s also the opportunity cost to consider. Why put your money to work in an industry that might not recover for 2-3 years? And can you stand the bumpy ride in the meantime?

Investing is all about generating the best return from the amount of risk you’re prepared to take. The right airline stock could make you wealthy in time but I think this part of the market is only for the brave or recklessly bold right now. 

The post Looking for the best UK stocks to buy now? I’d avoid these like the plague appeared first on The Motley Fool UK.

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• Down 29%, should I buy Palantir for my Stocks and Shares ISA?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value, Tesco, and The Gym Group. 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.

Stock market goals

Forget the quick wins — good investing rests on solid foundations and knowing what you want to achieve before throwing every penny you have at stocks. Simply ‘wanting to be rich’ isn’t enough because it won’t help you refine your strategy (there are many ways of making money in the markets).

So, what are your financial goals? Is it saving for retirement in the future or generating income now? Are you saving for your child’s university tuition fees or a deposit on a house?

Just as important is knowing how much energy you’re willing to commit to investing. There’s little point buying single company stocks if you’re not prepared to follow their progress (or lack of). You’ll probably be better off buying funds managed by professionals or, alternatively, low-cost index trackers and doing something else with your time. 

Speaking of which…

Take advantage of time

One powerful advantage retail investors have over the professionals is that the latter’s scorecards are continually scrutinised. If they don’t perform, their careers are cut short. This is unfortunate since investing success can/should only really be judged over years and ideally decades. The short-term moves of stock markets tend to be pretty meaningless.

As retail investors, we don’t have this problem. They’ll be no one to hand us a P45 if we underperform for a while.

More importantly, we can use this to our advantage through buying shares in undervalued companies experiencing temporary problems. Assuming all goes well, we’ll reap the rewards later down the line.

Diversify (but not too much)

Throwing all your cash at only a few stocks is a recipe for ruin, particularly if they’re in volatile sectors such as oil and gas or biotech. 

Having said this, being overly diversified can hold you back too. The more shares you own, the less you deviate from the market as a whole.

To beat the stock market, you need to do something different to the market. It’s no surprise, therefore, that some of the UK’s most successful money managers are those who only invest in their best ideas. Think 20-30 stocks…think Terry Smith or Nick Train. 

There’s no magic bullet when it comes to defining how many shares to hold but here’s a simple acid test: if you’re losing sleep over your portfolio, you’re likely taking on too much risk.

Stick to your script

It can be easy to deviate from your own script in pursuit of riches, especially when others appear to be doubling their wealth overnight. How many usually-calm private investors were rushing to invest in Synairgen last week? Quite a few, I imagine.

Even the professionals sometimes struggle to do it and they’re managing other peoples’ money (see Neil Woodford’s fall from grace last year).

Don’t follow the herd. Avoid unnecessary commission costs that erode returns. Learn to sit on your hands. Learn to buy and hold. 

The post Learning how to invest in the stock market? Read this now! appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I’m not so sure. Before explaining why, let’s look at today’s interim results from the company — originally intended for release in mid-May. 

Revenue hit

Of course, a lot of this morning’s numbers won’t really matter all that much since they only reflect trading in the 26 weeks to 28 March – not long after the UK went into lockdown.   

Nevertheless, at £510.5m, revenue was almost 8% down compared to the same period in the previous year. Underlying pre-tax profit was even worse, tumbling almost 72% to just £9.4m. This was despite sales to the end of February being “broadly in line” with the previous year. 

To its credit, the company has done what it can to minimise the impact of the lockdown on its finances. Expenditure has been slashed and 93% of its staff have been furloughed, with the remainder taking a 20% hit to their salaries. It’s also made use of government grants and reliefs where possible. 

Taking all this into account, what are the arguments in favour of taking a stake now?

Glass half full

First, it seems at least some UK drinkers are desperate for pubs to reopen. As a result, the idea that revenues may bounce back seem logical. Whether this happens in practice is something entirely different, of course.

Second, the recently-announced deal to combine its brewing business with Carlsberg UK should allow management more time to focus on its pubs and accommodation. 

It’s also good for its finances. Assuming the deal goes through, Marston’s will have a 40% stake in the new company. It will also receive a cash payment of £273m, which can be used to reduce debt.

Third, it’s worth highlighting, as Marston’s did today, that its pub estate is mostly freehold and located outside city centres. The fact that nine out of 10 of these pubs have outside space could prove very important as drinkers adapt to the new ‘normal’. 

Last, it’s certainly possible the company could actually grow market share as more competitors go out of business.

Glass half empty

On the other hand, there are some solid reasons for continuing to give Marston’s a wide berth for now. Another round of the coronavirus can’t be ruled out. And while a second lockdown seems unlikely, this would be a nightmare for an already-wounded industry.

Even if a second wave is avoided, the psychological impact of the virus could prove a drag on earnings for a while.

In addition to all this, you have a number of more general issues facing the pub industry. These include rising costs and the fact that an increasing number of us, particularly young people, are choosing to ditch alcohol completely.

The great unknown

As investors, we’re told to be “greedy when others are fearful.” As profitable this strategy has been for investing legend Warren Buffett, I’m not feeling the urge to snap up Marston’s right now. Even if the share price is still roughly 50% below where it was at the start of 2020.

With such an uncertain outlook — and no dividends to tide investors over — this is one for the watchlist at best.

For me, there are far less risky ways of making money in the market. 

The post Is cheap pub stock Marston’s now a screaming buy? appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Marstons. 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.

That said, the reaction to today’s trading update isn’t quite so great. Why is this? And am I worried?

Rightmove in demand

First, the good news.

Today, the £5bn cap company said that demand for its services had been strong. Indeed, its platform had seen 10 of its busiest days ever since 13 May (when the government permitted agents and developers to reopen). Weekly email updates are receiving an average of 800,000 views and the number of properties being listed is also rising — up “over 10%” in the last week compared to this time last year.

In addition to this, the FTSE 100 constituent said that house sales in England were 10% higher than they were one year ago.  Of course, some of this may be down to deals finally completing after being on hold during lockdown.

So, why are the shares down?

There are a few likely reasons.

First, Rightmove did report a 3.8% fall in its membership base (to just over 19,000) since the end of 2019. It attributed this partly to agencies having cash flow problems as a result of the pandemic, although ‘traditional’ agents seemed to be weathering the coronavirus storm so far. 

Second, Rightmove announced today that it would continue to give discounts to agencies beyond the 75% offered from April to July. A 60% reduction will be given to customers in England in August, falling to 40% in September. Those in Wales, whose market reopened yesterday, will still get a 75% discount for August and 60% for September. Agents in Scotland are getting the same terms. Its market opens next Monday.  

While this should appease customers, it’s not ideal for Rightmove’s top line. Extending this support will likely hit revenue by £17m-£20m. This is on top of the £65m-£75m impact already predicted.

Third, the company’s ongoing unwillingness to provide guidance on its outlook for profits, while prudent, may also have frustrated some.

This decision, however, makes complete sense to me. It’s early days in terms of the recovery and we could still see markets fall should we get a second wave or the economic damage is worse than thought. House prices are already expected to fall 5% this year.

Happy holder

Rightmove’s shares are down by 3.5% as I type.

Not that this concerns me. Rightmove remains the clear leader in what it does with an 85% market share and, according to the company, over 50% more listings in the UK than any other source. That’s a powerful advantage that competitors have hitherto failed to erode.

Moreover, it seems the company is doing all it can to mitigate the impact of coronavirus on its finances. Despite having net cash on its balance sheet, management has taken salary cuts and a third of employees were furloughed back in April.

And even if we do get a second wave, Rightmove will be prepared. Its tool to help agents provide online viewing videos has already proved popular, as have advice webinars for both agents and house hunters.

Taking all the above into account, I’m happy to continue holding this quality business. I’ll even consider adding to my position should today’s fall mark the beginning of another period of volatility for the share price.

The post Top FTSE 100 stock Rightmove is down today. Here’s why I’d buy more appeared first on The Motley Fool UK.

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Paul Summers owns shares in Rightmove. The Motley Fool UK has recommended Rightmove. 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.

Then again, trying to predict where the market will be in the near term with any certainty is a fool’s errand. That’s why, despite being wary, I’m still buying stocks here and there. Here’s the strategy I’ve been using.   

1. Quality first

Buying quality stocks won’t protect me from a market crash, but it should stop me from impulsively selling them if/when it happens.

What does ‘quality’ look like? For me, it’s a company that has a big market share, perhaps in a niche area. It’s one that has limited/no debt, great growth prospects, and a strong management team who are also major shareholders. 

Tick enough of these boxes and you’ve probably found a decent investment, even at a fairly high price.

2. Build a position gradually

There’s no rule that says you must throw your money at a stock in one go. You may end up making a lot of money doing so, but it’s also a recipe for anxiety, particularly if you suspect there could be more volatility on the way.

Enter ‘pound-cost averaging’. It’s the private investor’s not-so-secret weapon. Forget the jargon — it simply means drip-feeding your money into stocks over a period of time. 

Not going all-in also means you should still have some powder dry if another market crash happens in 2020. Hence I’m buying, but I’m not buying big. 

3. Safety in numbers

There’s no magic number when it comes to how many stocks you should own, but the fewer you have, the more risk you’re taking on. This is why I make sure to diversify across 20 or so companies and ensure that no single holding is so big that it dominates my portfolio.

If buying single-company stocks feels too risky given the possibility of another market crash, then a selection of passive and/or active funds might be the best option. You’ll never generate more than the market return with the former, but you’ll never underperform either. The latter delegates decisions to a professional fund manager, thereby relieving you of some of the stress.

4. Have a hedge

Stocks generate by far the best returns over the long term. Nevertheless, the fourth part of my strategy involves having at least some exposure to assets that history shows tend to rise in value when stocks fall. Think bonds and precious metals such as gold.

Should another market crash happen, these holdings should help stem the bleeding from my portfolio, even if it does mean sacrificing gains in the long run. 

5. Look to the future

No one knows exactly where markets will be in 10 or 20 years but history tells us they should be higher than where they are now. That said, some sectors are unlikely to be in rude health.

This being the case, the final part of my strategy involves ignoring the numbers and asking myself this question: “What sort of companies are likely to grow substantially going forward?” This explains why quite a bit of my capital is now tied up in stocks and funds that focus on video gaming and robotics/automation, and not in industries in gradual, but very real, decline such as oil or tobacco.

The post Fear another market crash? Here’s my strategy for buying stocks now appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

So, which of these battered top-tier stocks, if any, is the best buy right now?

FTSE 100 bargains?

A lack of earnings guidance makes applying traditional valuation methods tricky at best, and redundant at worst. There’s also no need to discuss dividends, since all of the above have shelved payouts. With this being the case, we need to adopt a more qualitative approach. 

Strengths include all three being established heavyweights. In a sector that could see multiple smaller operators go out of business, this should ultimately mean less competition. All three FTSE 100 constituents have also been proactive in reducing costs (although, sadly, it looks inevitable the some furloughed workers will eventually have their jobs cut).  

On the flip side, all still have sizeable fixed costs they can’t avoid, such as ongoing maintenance of their assets. They also have significant amounts of debt on their balance sheets. 

Keep your distance!

Grounding planes and the like will only get you so far, of course. The ability of the three companies to recover rests on several things beyond their control.

Chief among these is whether there’s a second wave of the virus. If there is, how bad might it be? Since we don’t yet know, I don’t think it’s worth contemplating this scenario for long. Simply expect another massive hit to their respective share prices if it comes to pass. If the possibility of that scares you, steer clear!

Let’s assume, instead, that a big second wave is avoided but protective measures are still enforced.

Should this come about, I suspect IAG may struggle. The compulsory wearing of masks makes more sense than separating passengers by seats but will likely make for a fairly unpleasant experience. The number of customers on a ship may be far greater than a single flight, but Carnival would surely be able to adopt social distancing measures with greater ease.

TUI is perhaps the most problematic of this FTSE 100 bunch since it owns cruise lines, airlines, and a hotel portfolio. The firm also faces growing competition for bookings from nimbler rivals, such as On the Beach.

On the flip side, this diversification could become a buffer for TUI in the better-than-expected scenario since it’s not wholly dependent on one earnings steam. 

And the winner is…

Forget logistical barriers, it’s the psychological wounds inflicted by the coronavirus that could have the greatest lasting impact. As such, I still think it takes courage to buy any of these FTSE 100 stocks right now. This is despite recent rallies suggesting the worst might be over.

Notwithstanding this, I think the cruise line operator just about edges this three-way battle. While undoubtedly biased (I hold), it dominates its industry in a way IAG and TUI can only dream of doing. A 45% market share is about as good as you’ll ever get in the cut-throat travel industry.

Factor in higher operating margins, increasingly active retirees in the West along with growth opportunities in the East and I’d argue the business is the best FTSE 100 ‘bargain’ buy here.

The post FTSE 100 bargain buy: Carnival, IAG or TUI shares? appeared first on The Motley Fool UK.

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Paul Summers owns shares of Carnival. The Motley Fool UK has recommended Carnival and On The Beach. 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.

Support can’t last

Chancellor Rishi Sunak has been praised by many for the swift response to the damage wrought by the pandemic by introducing the furlough scheme. Mortgage ‘holidays’ have also provided people with some breathing space to reassess their finances.

Clearly however, there’s a limit on how long this arrangement can continue. As such, unemployment levels look set to get grow significantly in the rest of 2020 as businesses learn the full costs of the pandemic on trading. 

It seems realistic rather than overly negative to say that some parts of the economy will take a lot longer to recover than others. Some may struggle to recover at all. 

Second wave?

The gradual lifting of lockdown restrictions has been welcomed by some, criticised by others.

Regardless of where you stand, the current lack of vaccine means there’s is at least a chance of countries being hit with a second wave of the virus . We just don’t know how big that probability is.

Even if a big second wave isn’t forthcoming, I still have difficulty believing that the economy will spring back to life fast. Yes, there might be an initial surge in activity as people ‘let off steam’, but a looming recession and social distancing restrictions make it likely that consumer spending is unlikely to go back to normal.  The psychological wounds inflicted by the coronavirus won’t heal overnight. 

Murky earnings outlook

Stocks may have recovered from March’s market crash but many companies are still unable/unwilling to provide any kind of guidance on earnings for the rest of 2020.

This makes valuing a business somewhat tricky. We know what shares are trading at, but we don’t know how fair these prices are. This, of course, doesn’t stop analysts from speculating. 

The question to ask is whether estimates are likely to be hit. If current projections prove too optimistic (even after taking into account the impact of the virus), expect share prices to be walloped. 

Market crash 2.0

If all this sounds very negative, don’t despair! There are things you can do now to prepare for the possibility that markets might fall again.  

Chief among these is checking that you’re still happy with anything you already own. Holding companies with healthy balance sheets is more important than ever, in my opinion, and anything I own with debt is receiving extra scrutiny these days.

Second, I’ve built up a decent cash position to capitalise on any big drops in coveted quality stocks. One of the worst things in investing is not that markets fall, it’s having no dry powder to take advantage when they do!

That said, holding too much cash for too long should still be avoided. This is why — third —  I’m continuing to buy stocks where I think some of this risk is already priced-in or where the long-term outlook for a company or sector remains bright. 

Finally, I’m limiting my news consumption. Keeping some distance, at least during trading hours, should help avoid any emotional buying or selling.

The post Stock market crash round 2 may be coming. Here’s what I’m doing now! appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Here — in a nutshell — is how to do it. 

1. Sort your finances

Before you’ve even bought a single share, you need to work out what funds you have available. Investing is a long-term game and should only be done using cash you won’t need for at least five years. With the coronavirus placing the economy in snooze mode, that’s harder to gauge than it used to be.

The good news is that you don’t need to already have a fortune to make one, and every little helps. Investment portfolios can be built from as little as £25 a month. 

If you’ve already tackled high-interest debts and have an emergency fund built up, you’re probably good to go.

2. Open a Stocks and Shares ISA

If you’re wanting to invest, you may as well do it in the most tax-efficient way possible.

Keeping anything you own within the ISA wrapper rather than in a standard trading account saves you from paying tax on any profits you make or dividend income you receive.

Opening a Stocks and Shares ISA with an established provider, such as Hargreaves Lansdown, AJ Bell or Interactive Investor, takes only a few minutes. Your broker will act as the middle-man in the market, matching buyers with sellers. It will also hold your shares on your behalf.

3. Get to know yourself

Before launching into a buying spree, it’s vital to know how long you intend to stay invested and what proportion of your portfolio should be in stocks.

A good starting point is your age. Generally speaking, someone in their 20s will usually have a far higher risk tolerance compared to someone approaching (or in) retirement because they have more time to respond to setbacks.

Young investors will, therefore, have more of their money in individual stocks or funds. This allows them to benefit as much as possible from the power of compounding over time.

Those in their golden years will likely hold stocks too. However, they’ll also own more of other assets such as bonds and property since these tend to give more protection during volatile periods (even if the returns aren’t as good).

4. Start slow

To buy stock in a company, you need to enter its ticker. Tesco‘s ticker, for example, is TSCO. You’ll then get a live quote that needs to be accepted before the countdown expires for the trade to go through. 

Inevitably, purchasing stock incurs a fee (in the range of £8-£12). Another cost to consider is the ‘spread’ (the difference between the price at which you can buy and the price you can sell at). Stamp duty, at 0.5%, is also charged to buyers. 

Don’t think that you need to invest all your money in one go. A good option for understandably nervous newbies is to buy in equal, monthly instalments. Doing this should help smooth out volatility in the markets. When stocks are down, your money buys you more and vice versa.

The commission fees for regular investing are also lower because trades are made on a fixed date. Expect to pay roughly £1 per trade.

The post How to start buying stocks and shares appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.