With £300 to spare, here's how I'll start investing this October

The idea of ​​getting into the stock market can be exciting but scary. For example, one of the concerns of some people is that it is impossible to start investing without a large amount of money.

Actually, it's not. Personally I see some advantages to starting small and trying to keep the cost of any beginners mistakes as low as possible.

If I had £300 to spare and had never invested before, here is the approach I would take to get started this month.

Read, read, read

First I will try to understand more about how the stock market actually works. It's not just that investing in a successful company will automatically help me make money.

I need to understand the company's future prospects – and how well (or not) its current valuation reflects those prospects.

Readiness to invest

Even if I have £300, I would like to manage my risk by spreading my selection across more than one share.

But before I can spend a single penny on the stock market I will have to find a way to use my £300 to buy shares.

So I would set up a shares trading account or a Stocks and Shares ISA. There's a lot available and maybe in the future I'll look for some cash to put in, but initially I'd consider my first fixed budget of £300. I can pay attention to things like low fees and commissions, when looking for an account that best suits my financial circumstances.

Good habits from day one

I wouldn't have started investing with the dream of turning my £300 into a million pounds. I wouldn't even expect to turn it into £1,000, fun though that might be (and, in practice, might be).

Instead, I'll start by following billionaire investor Warren Buffett, who says the first rule of investing is never to lose money and the second rule is don't forget the first!

In other words, my focus would not be on trying to make as much money as possible at the beginning, but rather on managing my risk closely while learning. In fact, I wouldn't just use that risk reduction method when I first started investing – like Buffett, I'll carry it through all my decades of investing.

An easy start

An example of the type of share that I think new investors should consider buying City of London Investment Trust (LSE: CTY).

As an investment trust, it invests in many different companies, helping my diversification. These are mostly British companies, which means that the City of London faces risks if the UK economy does not perform well.

In the past five years, the share has only increased by 5% – not what most people dream of when they start investing.

Still, for a risk-averse beginner, I like its approach to conservative portfolio management. It also doesn't hurt that the trust has increased its dividend every year since the 1960s.

paid a dividend of 4.8% compared to the previous trading day FTSE 100 ratio, which helps to compensate in recent years for the relative performance of the share price.