5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he was a first-time investor now.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

How to start buying shares for the first time? The appeal can be obvious, but the process can seem off-putting.

In fact I think it can be a simple thing to do.

Beginning on a relatively modest scale rather than waiting to save up thousands of pounds first could mean not only that I start buying shares sooner, but also that any beginner’s mistakes are less costly.

1. Setting up a dealing account

My first move would be to put the money into an account that would let me buy and sell shares. That might be a share-dealing account or Stocks and Shares ISA, for example.

With under £500 to invest but still diversifying across different shares to help manage my risks, commissions and fees could soon add up. So I would pay close attention to what suited my budget and investment objectives.

2. Defining an investment objective

Some investors want to buy growth shares. Others are looking for passive income streams thanks to dividends. Some would like both.

I think being clear about one’s objectives can help inform choices along the way.

3. Learning about the stock market

I do not own shares in robotic maker Intuitive Surgical (NASDAQ: ISRG).

Why? After all, I think it is a great business. The market for surgery is large and likely to remain that way indefinitely. By automating parts of the process, Intuitive’s robotics offering can potentially offer hospitals consistency and cost savings.

Selling and servicing the machines and selling single-use attachments used in each surgery is lucrative business. Rivals may eye the firm’s success and launch similar products, pushing down profitability. In fact I see that as a key risk.

But Intuitive has strong advantages, from proprietary technology to a vast library of past procedural processes.

So, why do I not own the shares? Put simply, I think they are just too expensive. Getting to grips with concepts such as valuation matters from the moment one starts investing, if not before.

4. Building a portfolio

Next I would make a shopping list of what I thought were great businesses. Where those shares were available at what I saw as an attractive valuation, I would start buying them with my £500.

That £500 would be enough for me to diversify, for example by buying two or three different shares. I could also consider buying shares in investment trusts, that themselves are usually diversified across a range of different investments.

I would start buying shares the way I meant to go on: focussing on high-quality companies and with an intention to hold for the long term.

5. Holding and aiming for long-term growth

Over time, my experience would grow. Hopefully so too would my portfolio valuation and passive income streams, although that is not guaranteed.

I would aim not to trade regularly. But I would aim to invest more money over time, whether fresh cash or simply the dividends I earned.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Intuitive Surgical. 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.

More on Investing Articles

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »

Investing Articles

Why I’ve just sold two of the largest investments in my Stocks and Shares ISA

Stephen Wright has been making room for a new addition to his Stocks and Shares ISA. What is it and…

Read more »