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There is almost always something else to pay for in life. From bills to luxuries and gifts to daily necessities, the need to spend never seems to stop. That is one reason some people who plan to start buying shares never get around to doing it.
That is understandable. Everyone has their own priorities – and money can only be stretched so far.
But it can also mean that some people miss out on what could potentially be lucrative stock market opportunities. Owning shares, if it goes well, can mean not only increasing the value of the investment but also receiving dividends along the way in the form of dividends.
That does not even necessarily require a lot of money to get going. Here is how someone with no stock market experience could start investing this week if they are able to spare £80 a month.
Taking the long-term approach
With £80 a month, you may be thinking, is it even worth bothering?
In the short term, it may hardly seem so. But investing with a long-term mindset can be transformative.
That £80 a month adds up to £960 per year. Imagine that someone starts buying shares using that each month and compounds it at 10% annually.
After 10 years, their portfolio could be worth over £16,000. After 20 years, it may have grown to over £57,000. Three decades in, the value could be north of £165,000.
All for £80 a month!
Aiming for strong returns
Now, a 10% compound annual growth rate may not sound like much.
In practice, though, it can be challenging – but possible.
After all, that is a long-term average, factoring in bad years as well as good ones. It includes dividends (never guaranteed) and share price gains – but share prices can fall as well as rise.
Still, I do think it is possible.
Growth and income potential
As an example, one share I own is Greggs (LSE: GRG).
Down 47% in a year, the Greggs share price is hardly what people dream of when they start buying shares.
Then again, it does mean the share now sells for 12 times earnings. I see that as potentially good value.
The company has warned of weaker earnings this year and I see risks including the impact of higher employment costs on profit margins.
But with a strong brand, compelling value proposition for consumers, and thousands of shops, I thinks Greggs has long-term growth potential.
That could be good news for the battered share price. On top of that, the share currently offers a 4.2% dividend yield.
Getting ready to invest
As Greggs demonstrates, any company can hit hard times. It therefore makes sense to diversify a portfolio. That can be done even on £80 a month.
Before someone makes a move to start buying shares, it also pays to get to grips with key concepts like valuation and how to be a good investor.
That £80 a month also needs to find a home from where it can be put into the stock market, such as a share-dealing account, Stocks and Shares ISA, or share-dealing app.
