A lack of savings when you’re young doesn’t really bother most people. But as they start to raise a family, look for career progression, and potentially buy a house, savings become very important. For some, it’s impossible to build up a pool of money to be invested because of large expenses or low income.
Yet the recent stock market crash has seen large, reputable companies have billions wiped off their valuations. This makes some stocks look very attractive to buy into. Even with no savings and only a small amount of initial investment, it could be the start you need to get involved in the markets. This can hopefully build your savings into the longer term.
How much do I need to invest?
Unlike buying a property or a corporate bond, there’s no minimum amount to invest in the stock market. The share price of a company may be 100p. So you can buy any denomination of the share. If you buy 500 shares it’ll cost you £500. This flexible aspect of stock investing allows you to start off with a small amount of money.
It also allows you to be diversified in your investing approach. If I had a few hundred pounds to invest with no savings, I’d split it up into buying several different stocks. For example, I’d buy a stock which pays me a dividend, one which I think could be high growth in the future, and one which is very defensive. One good growth firm is Boohoo Group.
This strategy of diversification remains the same, whether I’m investing £100,000 or £100.
Why buy now?
No one has managed to escape the coronavirus’s impact on the world. The stock market has taken a hit, as most of the companies within it has seen a fall in revenues and profit. Most consumers are simply not spending money on anything except the necessities, and certainly not taking advantage of the travel or entertainment sector.
At some point, the virus likely will recede to a level whereby these sectors can reopen and resume business. In these cases, I think we’ll see a turnaround in business, although maybe not until next year. As a long-term investor, you can grow your savings better when it compounds over time. So investing now when stocks trade at historical lows can allow you to buy and hold them for many years to come.
No savings = no problem
Everyone has to start somewhere when looking to build an investment portfolio. Just because you don’t have savings at present doesn’t mean it has to stay like that. Taking advantage of the stock market crash is a good way to start. Given the small minimum amount to invest, you can feel comfortable with whatever sum you decide on.
Jonathan Smith does not own shares in any firm mentioned. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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