I start buying shares at £500 – by doing this

Investing in the stock market may seem tempting. But many never do that. If you’re looking to start buying stocks and haven’t done so before, here he applies four key principles.

1. Start small

Some people put a lot of money aside over the years to get what they have in mind. ”enough” Start buying shares.

However, unlike some asset classes, you can buy stocks for relatively small amounts. Not only that, but like most skills in life, beginner mistakes are made when investing. By risking a relatively small amount of money, we hope to lessen the financial consequences of making such a mistake or simply having bad luck.

£500 isn’t a small amount, but it’s not a huge amount either. I start with that and invest through a stock trading account, or Stocks and Shares ISA.

2. Focus on the “what” rather than the “when”

Getting caught up in the market timing frenzy can be fascinating as a beginner. The potential allure of a once-in-a-lifetime opportunity can be hard to resist.

But I expect the stock market to be there for the rest of my life.Prices can go up and down but I hope there is a long time frame to buy stocks . So my initial focus is on “what– find great companies that I can invest in.

Only then did I say,when”.

for me, “when‘ is not about the performance of the market as a whole.Rather, it’s about whether the specific shares I like are available just now I think the price is attractive.

For example I think apple is a great business and has owned shares in the past. Does that mean I’ll buy it today, or will I wait? The answer depends on the price at which I can buy Apple stock (and, of course, whether I have the cash to invest).

3. Take risks seriously

As an investor, I have two jobs that help me succeed. That means trying to increase your own money and avoid or minimize risk.

Many emphasize the potential of a particular investment, but it is the risk that ultimately undermines its performance.

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Let’s say you invest £500 evenly in 5 shares. 4 of them increase his by 20% and 1 loses 80% of its value. Even without taking into account the fees (which can actually reduce profits significantly in some cases), I am making a profit even though 4 out of 5 stocks are growing significantly. I don’t think so.

Risk is not an abstract concept. It’s an important concept to consider when buying stocks if you want to be a successful investor.

4. Diversify from day one

One of the key risk management tools is to diversify your investments. It’s known as diversification and I’ve been doing it since day one of investing.

So in the example above, I mentioned splitting £500 evenly over a small number of stocks, rather than investing it all in what I thought was my best investment idea.

The post about starting to buy shares at £500 was first published on The Motley Fool UK.

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C Ruane has no positions in any of the mentioned stocks. Motley Fool UK recommends Apple. The views expressed about the companies mentioned in this article are my own and may differ from the official recommendations I make on subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.

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