A keenness to start investing and actually doing it are two different things.
Many people seem to put off making a first move in the stock market. But putting things off too long can mean missed opportunities.
Rather than waiting to save up a large sum of money before getting into the stock market, here is why and how I would start investing with £500, if I had no experience of purchasing shares before.
Small can be beautiful
I actually see some advantages to starting on a small scale rather than waiting until having more funds to start investing.
One is that it would let me begin sooner, as opposed to waiting for years while I saved up the money. As a long-term investor, I would prefer to maximise the potential timeframe of my market activity.
It also means that, if I make some beginner’s mistakes when I start investing, they will hopefully cost me less than if I had waited to save up larger amounts before beginning.
Sticking to the basics
Does investing with a modest amount, such as under £500, mean I ought to take more or less risk? It may seem tempting to take more risks, to try and make up for the fact that I was not investing much at the start.
In fact though, I would take the opposite approach. I would be conscious of risk management from day one – and investing under £500, my priority would be not to take unnecessary risks.
For example, I would want to start investing as I meant to go on – by diversifying my holdings across a range of different shares. Even with under £500, I could split my funds over two or three different shares.
Finding shares to buy
One option would be to invest in individual companies like Unilever. An alternative (or indeed, I could do both) would be to buy shares in an investment trust. This is a form of pooled investments. An example is the F&C Investment Trust (LSE: FCIT) which used to be known as Foreign & Colonial.
Having started in the 1860s, it has certainly ridden a few market storms. In recent years it has performed strongly, with the shares moving up 43% over the past five years.
This is far better than the UK’s flagship FTSE 100 index, which has gained 11% in the period.
A big factor for this success is that F&C has a global portfolio. Indeed, its three biggest holdings are US tech giants Microsoft, Nvidia and Google parent Alphabet.
In the event of another tech turndown, that could mean the value of F&C shares falls too. But investing in it would give me exposure to a diverse selection of promising companies in multiple markets – even if I only have a few hundred pounds to start.
Here’s my first move
How would I get going? My initial step would be to open a share-dealing account or Stocks & Shares ISA and put the money I wanted to invest in it. Then, I would start looking for shares to buy to begin my investment journey.
