New to investing? Here’s how £500 can set investors on the path to riches in 2025

Building a fortune in the stock market is a common investment goal. After all, there are plenty of success stories highlighting the tremendous wealth that can be unlocked by making the right decisions. Yet, despite the dream being shared by many, relatively few actually put their money to work.

Only around a quarter of the British adult population actively invests in the stock market. And while this has increased in recent years, that’s still firmly behind the 62% of adults in the US. And one leading cause is a feeling of not having sufficient money to invest.

Considering the UK is still enduring a cost-of-living crisis, that’s not a major surprise. But despite popular opinion, an investment portfolio can be kicked off with a relatively small sum of capital. In fact, £500 is more than enough to get the ball rolling.

All big things come from small beginnings

Even in the current elevated interest rate environment, most savings accounts don’t offer more than 4%. By comparison, shares have historically provided gains of 8% to 10%. And for successful stock pickers, those gains can be far more substantial.

At a 10% rate of return, a £500 lump sum investment can almost triple in the space of 10 years, or increase sevenfold in the space of 20. Gaining over £3,600 isn’t a life-changing sum, but it’s considerably more than the £910 a 3% savings account would provide over the same period. And for those able to consistently top up their portfolios with a spare £100 each month, investors aren’t left with £3,600, but rather £79,600!

Aiming for 10% returns

The biggest advantage that savings accounts have over investment portfolios is their near-risk-free characteristics. With larger potential gains come additional risk. And suppose a portfolio isn’t well managed or built on top-notch stocks? In that case, wealth can actually be destroyed instead of created.

With that in mind, let’s take a closer look at RELX (LSE:REL). Over the last 10 years, the data analytics provider has managed to significantly outperform the FTSE 100 index, enabling shareholders to reap a 13.8% annualised return. And while there are many factors driving this success, one of the primary growth catalysts has been the rising demand for data insights that management successfully monetised to generate recurring cash flow at high margins.

What’s more, with RELX targeting critical industries such as the legal, healthcare, and academic sectors, demand for its products and services doesn’t tend to wane during economic wobbles. As such, many institutional analysts view the business as a dependable, high-quality enterprise.

Does that make it a no-brainer? Sadly not, I feel. With RELX’s success story already widely recognised, the shares trade at a premium valuation in 2025. As such, unless the business is able to exceed already lofty expectations, continued double-digit annualised gains for new investors seem unlikely in my eyes. That’s especially true if the firm fails to keep up with increasingly strict data protection regulations.

Nevertheless, it embodies the traits of a winning investment. So when looking for similar double-digit opportunities elsewhere, hunting for similar characteristics can help eliminate a lot of duds from consideration.

The post New to investing? Here’s how £500 can set investors on the path to riches in 2025 appeared first on The Motley Fool UK.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended RELX. 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.