Image source: Getty Images
The idea of getting into the stock market is one that many people have as they try to figure out how to build wealth. However, some of them took action and started buying shares.
If I had less than £500 and wanted to work in the stock market for the first time, this is how I would do it.
1. Decide what success looks like
The first thing I would do would be to set my investment goals.
Those don't have to be ambitious. But it would be helpful to decide why I want to start buying stocks and what success would look like.
That may change over time, but being clear to myself from the start about what I wanted to achieve should help shape my decisions.
2. Setting up an interactive account
Next I would open a stock trading account and deposit my money into it, ready for use. That could be a share trading account or a Stocks and Shares ISA.
With so many options available, I can take the time to choose the one that best suits my goals and financial circumstances.
3. Learn about the stock market
Most people think they understand how the stock market works, whether they have ever owned stocks or not.
But from driving a car to fencing, many things may be a little different in practice than they seem in theory.
That is also true of the stock market.
So, before investing in one, I will learn more about how it works. How diversified should my portfolio be to help manage my risk, for example? What makes a good investment? What are some common warning signs to consider when choosing stocks to buy?
My next step would be to compile a list of stocks to start buying, either now or in the future.
Why are you waiting? In short: moderation.
I want to buy shares in what I think are great companies. But I want to buy them where I think the price is attractive – and obviously big business isn't cheap.
For example, consider Spirax (LSE: SPX).
A pump and steam technician may not be a household name (and its field may not sound like technical infrastructure). But it is a very successful business and has proven that its business model can be very profitable. Indeed, the company has the distinction of having increased its dividend per share annually for over a century.
There is risk (as with all stocks). Interim results for the month showed revenue down 3% year-on-year, although profits were up. As the company pointed out, the weak economic situation in key markets could continue to act as a drag on performance.
5. Build and manage a portfolio
Nevertheless, I would happily start buying Spirax shares – at the right price. To me, the stock still doesn't look cheap even though it's down 27% for the year.
Over time, I would buy when the stocks on my watch list were available at an attractive price.
First, though, I need to put together that stock list!
Source link
