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Juggling financial priorities can be difficult and some things seem to get pushed down the priority list time and time again. Take buying stocks as an example. Many people want to start investing in the stock market. But expenses like car maintenance or paying for a bachelor party get in the way.
A couple of hundred pounds could buy me a weekend holiday. But it might also be enough to allow me to start investing in stocks.
Here is how.
Why not wait?
It may seem that, rather than starting small, it makes sense to wait until you have a considerable amount of cash to put to work in the stock market.
In a way I think that makes sense. Minimum trading fees and charges can end up affecting one's investments, especially if investing on a relatively small scale. I would take the time to research the share trading account or stocks and Shares ISA that would best suit me if I were investing a couple of hundred pounds.
In some ways, however, I think it's better to start investing on a small scale today than to wait for some indeterminate future time when you hope to have more cash on hand. That day may never come – there's always something to spend money on!
While I hope to avoid beginner mistakes, at least if I made them with a few hundred pounds at stake, they would be less costly than if I were investing thousands.
Simple first steps
I would start by learning how the stock market works.
Just because a company is doing well doesn't necessarily mean it is a good investment. The price I pay is important, so I would learn to value stocks.
Even a great company with a great stock price can fail unexpectedly, so I would diversify my holdings. With a couple of hundred pounds that can be a challenge, but it is possible. You could split the money between two or three different companies, for example.
Different types of actions
Another way to achieve some diversification would be to start investing by buying shares in an investment trust.
It is basically a joint investment. When buying a stock like City of London Investment Trust (LSE: CTY), it would expose me to many different companies.
The City of London owns stakes in blue-chip companies FTSE 100 business like AstraZeneca and British American Tobacco. If I had ethical concerns (for example, about investing in a tobacco business), I might purchase an investment fund that better suits my preferences.
While the City of London focuses primarily on the UK, for example, some trusts have a more international outlook.
What I quite like about the City of London is that its overall approach means that its risks should be fairly close to those of the wider UK market. If the trust's trustees make bad decisions, its shares could perform worse than the broader market. But I would try to start investing with a strong aversion to risk.
As I learned more, I was able to decide my own risk tolerance. I would start investing with a preference for less risk, not more.
