Here’s how it’s possible to start investing with just £500
There’s never been an easier time to start investing than now. Back in the day, you had to call a stockbroker and pay hefty commission fees just to place a trade. Minimum investments were far higher, while up-to-date share price information was much harder to come by.
Thankfully, advancements in technology have changed the game entirely. People can now set up an investment account on their phone in minutes, while many platforms don’t charge any trading fees.
Plus, some of them offer the ability to buy fractional shares. That’s enormously helpful because some companies trade with very high share prices. One share of travel-booking firm Booking Holdings, for example, costs $5,696 today!
Moreover, thereâs loads of free info on YouTube, blogs, podcasts, and sites like The Motley Fool. Thatâs obviously great news for everyday investors.
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Advantages
Therefore, £500’s easily enough to start investing. Someone would ideally deposit this into a Stocks and Shares ISA to shield all potential returns from taxes.
If the investing app doesnât levy trading fees, this sum could be used to buy five different shares (£100 in each one). Then those positions could be built over time, as and when further cash becomes available to invest.
Indeed, I see two main advantages starting off with a small amount. One is that the losses would be less severe if the market suddenly tanks, which occasionally happens (without warning!).
Another is that beginners — whether they’re investing or learning to drive a car — inevitably make mistakes. Again, that could be far less costly with £500 than £50,000.
Mighty dividend yield
One FTSE 100 stock I think’s worth considering is Legal & General (LSE: LGEN). This is one of the UKâs largest financial services companies, specialising in pensions, asset management, and insurance. Its investment arm (LGIM) manages over £1trn in assets.
Last year, core operating profit grew 6% to £1.6bn, which was enough to fund a £500m share buyback this year. Forecast revenue growth over the next couple of years isn’t eye-popping, but this is an established and diversified business.
The biggest attraction here is the chunky dividend yield. Based on forecasts for 2025, the forward yield’s 8.6%, rising to 8.8% in 2026. This makes it one of the highest-yielding shares in the FTSE 100.
It means an investor could expect £8.60 back in dividends from every £100 invested. Or £43 from a £500 investment.
Of course, it’s worth noting that dividends aren’t guranteed. So I wouldn’t bet the farm on just one or two dividend shares. And Legal & General would face challenges if the UK economy, to which it’s heavily tied, suffers a downturn. LGIM’s also exposed to volatility in financial markets, especially with bonds.
Nevertheless, I think Legal & General’s perfectly set up to benefit from an ageing population, which is a powerful demographic trend that will play out over the next few decades. I expect the dividends to keep flowing steadily for years to come.
Were an investor to eventually build up a £5,000 position in Legal & General shares, they would generate £430 a year in passive income, assuming the same 8.6% yield. This could be used to reinvest in more shares, turbocharging the compounding process.
The post Here’s how it’s possible to start investing with just £500 appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
More reading
- 8.4% yield! Iâm eyeing this share for my SIPP in July
- Check out latest forecasts for the Legal & General share price and yield
- 2 cheap shares to consider for powerful passive income
- I bought 4,545 shares in this FTSE 100 dividend gem in 2020. Hereâs how much passive income Iâve had sinceâ¦
- With an 8% dividend yield, are Legal & General shares a screaming buy?
Ben McPoland has positions in Legal & General Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.
