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With the FTSE 100 index having recently hit an all-time high, many people who have previously thought about getting into the stock market are likely thinking now might be a good moment to start investing.
Personally, I reckon almost any time can be a good one to start buying shares. The point is which ones to buy.
Whether the market is doing well or terribly, my personal approach is always to try and buy stakes in great companies at attractive prices. I cannot claim credit for such an approach as it is the one used by billionaire investor Warren Buffett – and many before him.
Getting into the stock market can be done on a fairly modest budget. Even a few hundred pounds can be enough, though a challenge with small amounts can be the proportionate impact of minimum dealing fees and commissions.
So in this example, I am imagining an investor with a spare £3,000 who wants to start investing.
Making smart choices
That is enough to diversify across multiple different shares. Such diversification is a simple but powerful risk management strategy.
When it comes to the sorts of minimum fees I mentioned, they can also affect someone investing thousands not just hundreds of pounds.
So before starting an investment journey, it makes sense to compare options when choosing a share-dealing account, Stocks and Shares ISA or share-dealing app.
Keeping things simple
Of course, those smart choices are not just limited to how someone invests – they also apply to what they invest in.
When people start investing they sometimes have wild expectations of how successful they might be. In reality, for many new investors (and indeed many older ones) simply doing as well as the market overall can be challenging.
Indeed, that explains why some aim to keep things simple by investing in an index tracker fund.
Buying individual shares
Even when choosing a diversified portfolio of individual shares, I think the principle of keeping things simple can still be helpful.
For example, one share for investors to consider is Diageo (LSE: DGE). The company owns brands including Guinness and Johnnie Walker. Such brands can give it pricing power, helping it make billions of pounds a year in profit. That in turn can help Diageo grow its dividend per share, something it has already done each year for decades.
That is a fairly simple business model, in my view, but an effective one.
Dividends are never guaranteed to last for any company and Diageo has been struggling with a slowdown in demand in markets such as Latin America. A longer-term risk is declining alcohol consumption among younger generations.
If it cannot address those challenges successfully, the Diageo share price could keep falling following its 21% decline so far this year.
But I see it as a company with great, unique assets that hopefully can help it prosper over the long term.
