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it is easy to dream of getting into the stock market – but another thing altogether actually to start investing!
One reason people put off making their dream a reality can be the perception that they need to save lots of money before they start buying shares.
In reality, though, it does not require much to invest and certainly nothing like £100,000! In fact, someone could invest with just £1,000 or even £100.
So, what is the difference and is there an optimal amount?
Focusing on the individual circumstances
The reality is that everybody is different. That includes when it comes to their financial situation and investment approach, too.
There is no one-size-fits-all approach.
But it is vital that, whatever someone decides to invest, it is affordable for them.
It can be hard to diversify, but still important
A key risk management principle when investing is diversification. That simply means not putting all your eggs in one basket.
If someone decides to start investing with £1,000, that should be pretty straightforward. It could be split across two or three different companies, for example.
With £100, things get trickier. Splitting that across different shares could run into problems like minimum transaction fees adding up.
That is why, whatever the sum involved, it makes sense for someone to do research before they start investing and select the right share-dealing account, Stocks and Shares ISA, or trading app for their needs.
One way someone with £100 could aim to diversify would be to buy shares in an investment trust that itself holds stakes in dozens of different companies.
Choosing brilliant shares to buy
However much money one has to invest, there are a couple of ways to boost it.
One is to add more money. Regularly contributing to an ISA or share-dealing account is a habit that could potentially transform someone’s finances over time.
Another is to buy shares that create wealth, either through rising in price, paying dividends, or both.
That is easy to say. But how realistic is it in practice?
Looking for diamonds in the rough
I think it is possible, if from the moment they start investing, someone tries seriously to be a good investor.
For example, one share I own that I hope will grow in value over time, as well as paying me dividends, is FTSE 100 brewer and distiller Diageo (LSE: DGE).
It may not be a household name, but its brands like Guinness and Johnnie Walker are.
Lately, the business has been facing challenges that continue to pose a risk to revenues and profits. Younger consumers are drinking less than their forebears, while economic weakness is hurting demand for premium spirits in Latin America and elsewhere.
That helps explain why it is now 23% cheaper to buy one Diageo share than it was a year ago.
But the company has a proven business model and made a multibillion pound profit last year. Every year it makes a payment to each shareholder for each share they own (known as a dividend). That dividend per share had grown annually for over three decades.
Dividends are never guaranteed and even share prices that have fallen far can fall further. But I have no plans to sell my Diageo shares!
