The UK is in a recession and the cost-of-living crisis hasn’t gone away. So even though I might have some lofty ambitions about investing a lot of money, the reality is that it can be better to start small and be sensible. Here are the main steps I’d take to start investing, including a specific stock pick.
Accumulate and plan
To begin with, I’d accumulate small amounts, say £25 a week, and look to invest on a monthly basis. Even though investing fees are coming down, it would still be too expensive for me to purchase a stock in £10 increments. Therefore, by putting my weekly sums together, it can avoid me spending unnecessary money on transaction fees.
At this stage, I’d also get my goals clear — that is, what I want to achieve. There’s no point in me blindly buying stocks just because my friend has or for some other random reason. I need it to have an aim in mind.
For example, this could be to earn a certain amount in passive income. Or it could be to buy small-cap stocks that I believe could explode higher in the future.
Filter and diversify
Once I have my money and my goal, I can then move on to selecting the right stocks. I like to use a filter, which some online platforms have. It allows a user to add different guidelines, for example finding stocks currently at 52-week lows.
By applying a few filters, I can find a handful of stocks that meet my criteria. I can then use these and select the ones I want to buy.
From here, the next step is very important. I have to ensure that I’m patient and keep regularly investing over time. This allows me to diversify my portfolio going forward. Not only does this involve holding several shares, but it also means buying from different sectors and firms trading in different locations around the world.
A building block idea
For one of the first stocks I’d look to include in my mini portfolio, I’d go for Nvidia (NASDAQ:NVDA). This might surprise some, as it’s not a UK stock. Further, the share price has jumped by 221% over the past year, with a risk that I’m buying when it’s too expensive.
I’d still pick it because I think it’ll be a smart long-term hold in the portfolio. It’s the flagship artificial intelligence (AI) company, given the hold it has over the chips and processing units. I believe that AI is the future, so feel this company could do well for years to come.
Another factor here is that it gives me some global exposure. Nvidia sells worldwide, meaning that it’s not overly impacted by what’s going on in the UK. I think right now, it’s smart to try and avoid stocks that just trade in the UK, given the gloomy outlook.
Thanks to the rise of fractional share trading, I can invest small amounts even though the share price is over $700. Several large investment providers offer this and it’s becoming more popular.
Of course, the risk is that the growth stock has been fuelled on hype, which could fade, causing a sharp move lower. Yet due to my regular monthly investing approach, I could use this dip to buy more.
