With £10 a week, here’s how to start buying shares
One of the misconceptions some people have about the stock market is that it is only for the rich. In fact, it is possible to start buying shares with just a few pounds.
Here is how someone with no stock market experience could start investing with a spare £10 a week.
Get ready to invest
Before buying any shares, it is important to get set up in the right way. Partly that means having a way to invest. So an investor should set up something like a share-dealing account, Stocks and Shares ISA or trading app. That way they can put the £10 into it each week.
But I think a new investor also needs to set themselves up in terms of thinking about what they are doing. Learning how the market works can take a lifetime, but it is important to have at least a basic grasp of important concepts like valuation and diversification before you start buying shares.
Find shares to buy
Shares sell for different prices â some for pennies, while others are priced in the hundreds of pounds or more. A tenner a week adds up to around £520 a year, so in the beginning only some shares will be within affordable reach.
One option when investing small sums is to buy shares in a pooled investment, such as an investment trust. Such trusts typically own a diversified portfolio of shares themselves. So investing in them can be a simple way for an investor to get a certain level of diversification even on a limited budget.
A share to consider
If I was to start buying shares for the first time, I would be looking for the same thing I am after decades in the stock market: buying into great businesses at attractive prices.
Sometimes that might be because I hope a share price can grow. Other opportunities appeal to me because of the passive income streams I could earn from dividends. Some shares offer both growth and income potential.
One share I think investors should consider is construction equipment rental group Ashtead (LSE: AHT).
Over the past five years, its share price has grown 79%. Despite that, it currently sells for around 16 times earnings. Such a price-to-earnings ratio is one way investors value shares. I think 16 is decent value for as high-quality a business as Ashtead.
It has a sizeable asset base primarily in the US and a large set of existing and returning customers. Its business model is proven and Ashtead is undergoing a strategic transformation to try and boost its performance even further.
The dividend yield is 2.3%, well below FTSE 100 peers, but I would be willing to accept that (I own Ashtead in my own portfolio) as I am hopeful that the share price may rise over time.
One reason it might not is a weak economy leading to a slowdown of construction projects Stateside. That could hurt both revenues and profits at Ashtead.
From a long-term perspective though, I think the stock is one for further research.
The post With £10 a week, hereâs how to start buying shares appeared first on The Motley Fool UK.
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More reading
- Hereâs how a first-time stock market investor could realistically aim for a million!
- 3 FTSE 100 stocks to consider buying in June, with news expected
- No stock market experience, but want to aim for a million? Hereâs how to start with £1,000 this May!
C Ruane has positions in Ashtead Group Plc. The Motley Fool UK has recommended Ashtead Group Plc. 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.
