When is the right moment to start investing in the stock market? For years, lots of people want to, but for one reason or another do not get around to it.
A common reason is that they think the market might get cheaper (which is true, but then again, it might become more expensive). But there can be some more practical reasons at play too.
Do you understand how the market works?
People may spend a lifetime in the market without fully mastering how it works, even though experience can be a great teacher. But that is no excuse for jumping in straight away without knowing anything about how the market works. That strikes me as closer to gambling than investing.
So it helps to get to grips at least with basic, important concepts like valuation. That can help a new investor avoid one common beginner’s mistake: confusing a brilliant business for a brilliant investment.
How much money are you comfortably able to invest?
Another question someone should ask themselves when they want to start investing (or indeed, later on in their investing journey) is how much money they can afford to spare after taking care of life’s essentials.
The good news is that that does not need to be much. But it is important to make sure that money committed to investing does not upset the balance of financial necessities in other areas of life.
What’s your reason to invest
One thing a lot of people do not bother asking before they start investing is why they want to bother in the first place? What are they hoping to get out of it? The answer may seem obvious: to build wealth.
But there is more than one way to try and do that. For example, some investors buy into growth shares that may not pay dividends, but that they hope could soar in value if the business expands.
Other investors zoom in on shares that currently pay dividends, while some try to do both at once.
Getting ready to invest
Even if someone feels comfortable with their answers to such questions, they still need a practical way to start investing, like a share-dealing account or Stocks and Shares ISA.
Then comes the process of choosing what shares to buy. One I think merits consideration both for its growth and income prospects is Greggs (LSE: GRG).
Greggs’ share price has had a rough few years and now stands 41% below where it did five years ago. Looked at another way, that means it is 41% cheaper.
Meanwhile, the dividend yield is 3.9%. At that rate, each £1,000 invested today would hopefully earn £39 in dividends annually. That could actually increase if the dividend grows, although dividends can move either way at any company.
