A keenness to start investing and actually doing it are two different things.
Many people seem to put off making a first move in the stock market. But putting things off too long can mean missed opportunities.
Rather than waiting to save up a large sum of money before getting into the stock market, here is why and how I would start investing with £500, if I had no experience of purchasing shares before.
Small can be beautiful
I actually see some advantages to starting on a small scale rather than waiting until having more funds to start investing.
One is that it would let me begin sooner, as opposed to waiting for years while I saved up the money. As a long-term investor, I would prefer to maximise the potential timeframe of my market activity.
It also means that, if I make some beginner’s mistakes when I start investing, they will hopefully cost me less than if I had waited to save up larger amounts before beginning.
Sticking to the basics
Does investing with a modest amount, such as under £500, mean I ought to take more or less risk? It may seem tempting to take more risks, to try and make up for the fact that I was not investing much at the start.
In fact though, I would take the opposite approach. I would be conscious of risk management from day one – and investing under £500, my priority would be not to take unnecessary risks.
For example, I would want to start investing as I meant to go on – by diversifying my holdings across a range of different shares. Even with under £500, I could split my funds over two or three different shares.
Finding shares to buy
One option would be to invest in individual companies like Unilever. An alternative (or indeed, I could do both) would be to buy shares in an investment trust. This is a form of pooled investments. An example is the F&C Investment Trust (LSE: FCIT) which used to be known as Foreign & Colonial.
Having started in the 1860s, it has certainly ridden a few market storms. In recent years it has performed strongly, with the shares moving up 43% over the past five years.
This is far better than the UK’s flagship FTSE 100 index, which has gained 11% in the period.
A big factor for this success is that F&C has a global portfolio. Indeed, its three biggest holdings are US tech giants Microsoft, Nvidia and Google parent Alphabet.
In the event of another tech turndown, that could mean the value of F&C shares falls too. But investing in it would give me exposure to a diverse selection of promising companies in multiple markets – even if I only have a few hundred pounds to start.
Here’s my first move
How would I get going? My initial step would be to open a share-dealing account or Stocks & Shares ISA and put the money I wanted to invest in it. Then, I would start looking for shares to buy to begin my investment journey.
The post I’d start investing with under £500 like this! appeared first on The Motley Fool UK.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Microsoft, Nvidia, and Unilever Plc. 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.
Motley Fool UK 2024
