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A lot of people want to start investing in the stock market, yet somehow never do.
What seems like a good resolution at the time can fall prey to the demands of everyday life.
But it need not take a lot of money to get going in the stock market – and possibly begin a lifelong journey of building wealth.
Here are three things someone could do now that I think would help them start investing in the New Year.
1. Learn about how the stock market works
There is more to investing than buying shares in a good business, hoping that if it does better in the future then its share price will go up.
For one thing, while capital gains can be an important part of building wealth in the stock market, so can dividends. So it is useful to learn about things like free cash flows, as without them a company’s current dividend may well be unsustainable.
It is also worth learning about how to value shares.
There are other important lessons before someone is ready to invest, such as portfolio diversification.
Taking some time to learn the basics of investing could be time very well spent.
2. Set up a way to invest
Having done that, it could be time actually to start investing.
Before that, though, someone will need a way to invest. Setting it up can take time, so I think an early start makes sense.
That might be a share dealing account, for example, or a SIPP, Stocks and Shares ISA or trading app. Different investors each have their own needs and it is important for them to consider what works best for them.
3. Make a list of shares to buy
Being ready to invest and actually investing are two different things.
Some people soon find loads of shares they would like to buy, while others have cash to invest but no ideas they find compelling enough to act on. I never rush to invest for the sake of it, preferring only to buy a share when I really like the business and find the price attractive.
For example, one share I would like to own is engineering group Spirax Group (LSE: SPX).
It may not be a household name, but this is actually a FTSE 100 company. As it focuses on industrial clients, it is not widely known.
Within its target customer base, though, Spirax is not only known but often also well-regarded. It has expertise in some specific engineering areas, such as steam equipment.
Steam may sound quaint but in fact a lot of today’s industrial processes still rely heavily on steam, so businesses are willing to pay to have the right expertise on hand when required. That gives a specialist like Spirax pricing power.
The company is one of only a few in the FTSE 100 to have raised its dividend per share annually for decades (over half a century in its case).
But while I like the business, I am not keen on the current share price of 31 times earnings. So Spirax is on a list of shares I would like to buy, but only when the price strikes me as attractive enough.
This story originally appeared on Motley Fool
