Want to start buying shares with under £500? It’s possible – here’s how!
Getting into the stock market need not take thousands of pounds. Here is how someone with no investing experience and only a few hundred pounds to spare could get going today and start buying shares.
Set realistic expectations
Upfront, let me say that while some people make fortunes in the stock market, others end up with less than they put in.
In a way, I think it can make sense to start buying shares with a limited budget. That means any beginner’s mistakes will hopefully be less costly than if much bigger sums were at stake.
That said, I reckon it is also important to recognise that investing can be challenging. What looks easy before you do it (we’ve all heard the pub bore claiming they thought about investing in Tesla when its shares traded for a few dollars…) can turn out to be a lot more difficult in practice.
That is why I think it makes sense for someone to try and keep things simple when they start buying shares. For example, that can mean sticking to businesses they understand well, not being greedy, and also taking risks seriously.
It’s easy to focus on potential rewards not risks: but tellingly, a lot of brilliant investors do it the other way around.
Get ready to invest
Thinking about all that, an investor may get excited about buying certain shares. But without a practical way to do so, it is impossible.
So, from the outset, I think it makes sense for a new investor to set up a share-dealing account or Stocks and Shares ISA (or sign up for a trading app) so they are ready to start buying shares the moment they find one they like at what they think is an attractive price.
On the hunt for shares to buy
Even with under £500, it is possible to diversify across several different shares. That is a simple but important risk management method.
Finding shares to buy, by contrast, may not be so simple (and if it does, think again – consider why what strikes you as a great bargain is apparently not seen that way by everyone in the market. Maybe you have spotted a brilliant opportunity, but it never hurts to think through why people are selling as well as why you would like to buy).
One share I think investors should consider is retailer B&M European Value Retail (LSE: BME). I like its focus on serving consumers who want to save money on their regular shop, as well as for more occasional needs like buying new towels or decorating a spare room.
One risk of that value-led approach though, is that any deep-pocketed competitor may decide to undercut B&M on price and take away some of its custom.
However, I see the discount retailer as having a proven business model I think can potentially keep doing well, thanks to a large shop estate, sizeable customer base and well-honed buying operation.
It trades for around 10 times earnings, which I see as an attractive valuation for a company of this quality.
The post Want to start buying shares with under £500? It’s possible – here’s how! appeared first on The Motley Fool UK.
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C Ruane has positions in B&M European Value. The Motley Fool UK has recommended B&M European Value and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
