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Dreaming about buying stocks is one thing, but taking the actual step of starting to invest is another.
It doesn't have to be complicated, and you don't have to spend years and years saving to build up a huge investment fund before you start.
In fact, I think that starting earlier rather than later can have its advantages, as it allows for a longer time frame in the markets. As a long-term investor, I think that can be a big advantage. It also means that any beginner's mistakes can be less painful than if they were dealing with larger sums.
If I had £3,000 to spare, these are the moves I would make to start investing.
Deciding on an investment strategy
I would think about what my goals are in the stock market.
For example, do I want to invest in growing companies in the hopes of finding the next big thing? Tesla either NvidiaAm I more focused on the potential passive income streams offered by owning high-yield dividend stocks like M&G and Imperial MarksOr could a combination of both suit my goals?
While defining my goals, I would also take some time to learn how the stock market works. What makes a business good doesn't necessarily make an investment good.
That depends, in part, on the price you pay for your shares. That's why, before you start investing, it's important to familiarize yourself with concepts such as how stocks are valued.
Getting ready to invest
Another practical step I would take would be to deposit my £3,000 into an account that would allow me to buy shares.
This could be a share trading account or a stocks and shares ISA, for example. There are lots of options. I would look at the alternatives and choose the one that seemed best for my own needs.
Building a portfolio
My next step would be to start building a portfolio, choosing different stocks to buy.
Why not invest my £3,000 in what I thought was the best idea? The problem is that what seems like a great idea to me (and may in fact be one) can suddenly be seen in a very different light if circumstances change.
Even the best company can face unforeseen challenges. By diversifying my portfolio, I could reduce the risk of my £3,000 if one of my decisions goes wrong.
Finding stocks to buy
To pick stocks to buy for that portfolio when I start investing, I would stick with what I know.
For example, if I were a regular shopper at Greggs (LSE:GRG), I'd like to get an idea of how busy your stores are and how satisfied customers seem to be.
I could supplement that anecdotal and observational knowledge by reading the company’s accounts. That would also allow me to see things like how much debt the company had on its balance sheet (none – it ended last year with net cash and cash equivalents of almost £200m).
A competitive advantage in a market likely to benefit from high demand can help a business succeed. Greggs has it, from exclusive products to a large network of stores.
But it also faces risks, from wage inflation cutting into profits to cash-strapped consumers cutting back on takeout.
