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The idea of buying stocks and trying to build wealth can be appealing. But most people start buying stocks very late in life, if at all. By delaying, they may miss out on all kinds of opportunities over the decades.
It doesn't take a lot of money to start buying stocks. If I had never dipped my toe into the stock market and wanted to get started, with only a few hundred pounds to spare, here are the steps I would take.
1. Setting aside some money to invest
My first move will be to put £300 into an account which I can use to buy shares.
So I was going to look at the different options for share trading accounts and Stocks and Shares ISAs, and choose the one that felt best suited to my circumstances and investment goals.
£300 may not sound like a lot in the stock market. But it's enough to start investing and it's actually enough to allow me to split several stocks from the day I start investing. That's a simple but important way to manage risk.
2. Learning about stocks
Next, I will learn about how stocks and the stock market work in practice. One common mistake investors make when they first start buying stocks is confusing a good business with a good investment.
Take it an apple (NASDAQ: AAPL ) for example. I think it's a good business and, at the right price, it could be a good investment. But I have no plans to buy any shares in the tech giant right now, nor do I own any.
Why? In short, moderation. Apple has a large target market that is likely to remain large. It has a large customer base and I think that may continue to be true, thanks to its strong brand, proprietary technology and unique ecosystem of products and services. It is also very profitable.
But Apple shares are currently valued at about 35 times the company's earnings. That seems expensive to me for the business as it is, not to mention considering future risks ranging from increased competition from Chinese brands to the possibility of a weak economy hurting demand for premium phones.
I invest to make money. If I pay too much for even a large company, I can end up with shares worth less than what I paid for.
3. Buying and holding high quality stocks
My next step would be to decide my initial investment strategy (for example, the balance between growth and income that I wanted to target with my portfolio) and start finding stocks to buy.
After that, I'd buy them if I could make what I thought was an attractive fit, and hold on tight.
As an investor, not a trader, my time is long term. So I could look at owning shares for years, hopefully benefiting from appreciation and maybe dividends… if I picked the right ones and bought at the right price.
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