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How to start buying stocks for the first time? The appeal may be obvious, but the process may seem simple.
In fact I think it would be an easy thing to do.
Starting with a limited amount rather than waiting to save thousands of pounds first may not only mean that I start buying shares sooner, but also that any early mistakes are less costly.
1. Setting up an interactive account
My first step would be to deposit money into an account that would allow me to buy and sell stocks. That could be a trading account or a Stocks and Shares ISA, for example.
As I have less than £500 to invest but am still diversifying into different shares to help manage my risk, commissions and fees may soon be compounded. So I would pay more attention to what fits my budget and investment goals.
2. Defining the investment objective
Some investors want to buy growth stocks. Others want a stream of income because of benefits. Some would like both.
I think being clear about one’s goals can help inform choices along the way.
3. Learning about the stock market
I do not own shares in the robot maker Intuitive Surgical (NASDAQ: ISRG).
Why? After all, I think it’s good business. The surgery market is huge and likely to remain so forever. By automating parts of the process, Intuitive robotics offerings can provide hospitals with consistency and cost savings.
The sale and supply of equipment and the sale of individual attachments used for each operation is a very profitable business. Competitors may look at the company’s success and introduce similar products, reducing profits. In fact I see that as the main danger.
But Intuitive has strong advantages, from proprietary technology to a large library of past practices.
So, why am I not a shareholder? Simply put, I think they are too expensive. Understanding concepts like valuation matters from the time one starts investing, if not earlier.
4. Building a portfolio
Next I would make a shopping list of what I thought were big businesses. When those shares were available at what I saw as attractive valuations, I would start buying them with my £500.
That £500 was not enough for me to diversify, for example by buying two or three different shares. I might also consider buying shares in investment trusts, which are themselves often divided into different types of investments.
I would start buying stocks the way I meant to: focusing on high-quality companies and with the intention of holding for the long term.
5. Holding and aiming for long-term growth
Over time, my knowledge would grow. I hope so with my portfolio analysis and passive income streams, although that is not guaranteed.
I didn’t intend to trade regularly. But I will aim to invest more over time, whether it’s new cash or dividends I’ve received.
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