3 things to consider before you start investing

Many people try to build long-term wealth by owning stocks. But many other people plan to start investing but never get around to it.

Rather than dreaming about entering the stock market without making it a reality, I think, like many other parts of life, this is something that needs a plan.

Based on my experience, here are three things that I think are useful to consider before one starts buying stocks (and really, I mean as an experienced investor, when building a portfolio).

1. Choosing the right investment vehicle

I cannot buy shares directly BP or Vodafone. In order to invest in listed companies like them, I need some way to buy, hold, or sell shares.

There are a number of options available.

For example, I can set up a shared account. Depending on one’s circumstances, it may be financially beneficial to roll such an account into a tax-saving vehicle, for example by investing through a Stocks and Shares ISA.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

I think it’s worth spending time and effort looking at different options. After all, no two investors are alike.

2. Cultivating the habit of giving regularly

Of course, an ISA on its own is useless – it needs money in it before someone can start investing.

If I have a lump sum, I’d be happy to put it into an ISA. But I also like to aim to contribute regularly.

I think setting a goal here can be a useful form of self-discipline, helping to turn my good intentions into practical action. In fact, sometimes money can be more difficult than others. With December now just a few days away, an expensive month awaits many of us.

That makes it even more useful, in my opinion, to have a regular donation target – even if in practice, sometimes life gets in the way.

3. Matching investment style with investment objectives

Some people want to start investing because they believe they can see a stock that will increase in value by thousands of percentage points over a period of years, as Nvidia you have.

I understand that dream (and would be happy with such an outcome myself!)

But the reality is that many investors are getting far, far more modest returns – and they may be making losses. So I think it’s important to start investing with a realistic mindset – and keep it that way!

That is why there is one share that I think new investors should consider City of London Investment Trust (LSE: CTY).

In practice, while this share may outperform the wider UK market, I doubt it will do so spectacularly. After all, the trust invests in a wide range of well-known stocks and focuses mainly on British companies. Its long-term price performance I would rate as stronger than stellar.

In fact, that’s a common and favorite way of the City of London. The focus on the UK brings the risk that a sudden drop in the company’s outlook could hurt performance – The rise in budget taxes has already led many companies to warn of higher costs, for example.

However, as a long-term investor, I remain optimistic about the UK economic outlook. I also like City of London’s long-long streak of increasing its dividend per share each year.