How much money does someone really need to start buying shares?
Lots of people think about getting into the stock market, sometimes for years, but never actually start buying shares.
One reason for that is the perception that it takes a lot of money to start investing. In fact, it is possible to start investing on a very small scale.
How much money does it take to start in the stock market?
When I say a “small scale“, that could technically be just a few pounds. Some shares trade for pennies and it is usually possible to buy a single share.
But there are a couple of points worth bearing in mind.
A simple though important risk management method for investors is diversification. That basically means not putting all your eggs in one basket. That becomes harder to do with very, very small amounts.
But it is possible with even just a couple of hundred pounds.
Another thing to consider is minimum charges. Buying or selling shares often involves paying some sort of commission or fees. Those might be expressed as a flat percentage.
But they often also involve a minimum amount, as well as a percentage number.
If investing on a very small scale, that can eat up a disproportionately large amount of the money. Taking time to select the right share dealing account or Stocks and Shares ISA could potentially help overcome this challenge.
Considering those factors, I think someone could realistically start buying shares with just a couple of hundred pounds.
They may even be able to make a start on less, if they pay attention to staying diversified and avoiding minimum fees and charges.
Does it make sense to wait?
But while it is possible to start with a small amount, is that the smart thing to do?
Some people prefer to wait until they have more to invest.
One possible advantage I see to that, as well as helping overcome the challenges I outlined above, is that it can give someone time to learn more about how the stock market works and look for brilliant shares to buy.
But it can also mean that some good opportunities pass them by â and procrastination can breed more procrastination.
On top of that, if someone starts investing with a small amount, hopefully any beginnerâs mistakes will be less costly than if they wait until they can put a lot more money at stake.
Every new investor likes to think they can beat the market: in reality, beginnerâs mistakes are common.
Seen positively, they can offer valuable lessons. Hopefully cheap ones!
One share to consider
If someone is ready to start buying shares, one share I think is worth considering is Greggs (LSE: GRG).
Knowing and understanding a companyâs business is important for investors according to billionaire Warren Buffett â and I agree.
With thousands of shops it is easy to pop into a Greggs and see how busy it is. The company has a strong brand, large customer base, and compelling value proposition that helps set it apart from rivals.
Like most companies, its accounts are available free online.
The Greggs share price is down 42% so far this year. Ouch. Greggs misjudged summer product demand and there is a risk future such misjudgements could hurt sales and profits.
But over the long term, I think the company looks attractive.
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C Ruane has positions in Greggs Plc. The Motley Fool UK has recommended Greggs 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.
