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If you were curious about the stock market but had never invested a cent before, you wouldn't let years or even decades pass before you start investing. Rather it would start now, on a small scale. Here's how.
Set up a stock trading account
My first step would be practical. To buy stocks you would need some type of stock trading account.
Therefore, I would choose the account that suits me best, whether it is a simple shares trading account or a stocks and Shares ISA. I would then deposit my £250, so I was ready to start investing as soon as I found shares I wanted to buy.
Principles of a good investment
I would start as if I intended to continue. So, for example, even with only £250, I would still look to diversify rather than risk all my funds on a single stock. You could split the £250 between a couple of different shares, for example.
I would also take the approach of what I think it takes to be a good investor. So I would stick to companies that I understand, focus on companies that I think have a bright future, and also make sure that I don't overpay even for a stock that I like.
There is no rush. If I couldn't find stocks I liked at prices I liked, I could wait before buying.
Looking for stocks to buy
As an example of how to put that approach into practice, one stock I think investors, including new ones, should consider buying is British American Tobacco (LSE: BATS).
The company manufactures and sells tobacco products around the world, primarily cigarettes, but a growing portion of sales come from other products such as vaporizers.
Tobacco is big business and very profitable. British American's unique range of brands gives it pricing power. That has helped fund a dividend that is not only lucrative (the current yield is 8.7%) but also has a long history of growth. In fact, the dividend per share has increased every year this century.
Balance risk and reward
Still, all stocks have risks and that's true in the case of British American. Cigarette sales are declining in many markets and the company has a significant debt load. That could threaten the long-term sustainability of the juicy dividend.
Balancing risks and rewards is a key skill for investors from the day they start investing. Each of us has an individual approach and what works for someone else may not work for you or me.
I think British American has clear and considerable risks, but I admit this because I believe the potential passive income streams from its dividend more than offset them.
On top of that, some of the risks facing British Americans have already existed for decades and it is still generating significant free cash flows.
