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Year after year, people dream of getting into the stock market without actually doing anything about it. It does not take much money to start investing – but it does take some action!
Here is how a new investor could start investing with less than £300.
Step 1: getting a dealing account ready to use
As a first step, I think it would make sense to have a way to buy shares. That may seem like putting the cart before the horse… why set up an account before even finding shares to buy?
The answer is it can take time to find the right account from the many available and then to set it up. So I think doing this first is logical, as hopefully an investor will then be ready to invest as soon as they do find shares to buy.
So they could begin by comparing share-dealing account and Stocks and Shares ISA options. Having found a suitable one, they could then put the money in it, ready to invest.
Step 2: investing the right way, from day one
Next I think it could be sensible to learn the basics of good investing. For example, a simple but sensible way to help reduce risk if one share performs badly is to diversify across different companies.
Even with, say, £200 or £250, that is possible (though the dealing costs of lots of transactions could soon add up, underlining again the benefit of carefully choosing the right share-dealing account or Stocks and Shares ISA).
Figuring out how to start investing properly involves getting to grips with what investing is all about.
Simply finding a brilliant business is not necessarily enough. It is also important to ask questions like whether that brilliance can continue, what the balance sheet looks like (highly profitable businesses can and sometimes do go bankrupt if they have too much debt) and what its valuation is.
Step 2: building a portfolio to try and create wealth
With the right approach and having found great companies at attractive share prices, a stock market novice would be ready to start investing.
One share to consider is Smith & Nephew (LSE: SN). The medical devices manufacturer has had a tough five years, with its share price falling 43%.
That makes it a ‘recovery play’ and may not seem like an encouraging start. Clearly the company faces challenges, with risks including tough conditions facing the company’s surgical business in China.
We will find out this month how things are shaping up, when Smith & Nephew publishes its full-year results for 2024.
Stepping back to look at the longer term picture though, Smith & Nephew operates in a market with high demand. Quality matters, giving manufacturers pricing power.
Smith & Nephew has a wide product portfolio including innovative tools, a global sales operation, longstanding reputation and well-regarded brand. I see those as assets that can hopefully help its business in coming years – and its share price.