A fiver a day might not buy much. But it can lay the foundation for a share portfolio that can be built over the long term to try and accumulate wealth from a standing start. That’s right – even with just £5 a day, it is possible to start investing in blue-chip shares with proven and profitable businesses.
Why £5 a day is enough
£5 a day adds up to over £1,800 a year. Some shares sell for pennies. A lot of blue-chip shares trade for just a few pounds apiece, if that.
Some trading accounts target investors with big money to splash around. But not all do and there is a host of options available for those who want to start (and continue) investing on a more modest scale.
So an investor can look at different share-dealing accounts and Stocks and Shares ISAs and then make a choice about what might best suit their own financial circumstances and objectives.
Learning as you go
Even after decades of investing, billionaires like Warren Buffett admit to still making mistakes in the market.
So it is to be expected that, when someone starts investing, they may make some mistakes along the way.
That said, I think it makes sense to try and avoid some basic errors. So, before investing, I think the smart approach is to learn more about how the stock market works, including concepts such as valuation. Buying a good share at a bad price can end up as disappointing as buying a bad share.
Setting an investment strategy
Investing should not be like throwing mud at a wall to see what sticks.
Rather, successful investors like Buffett tend to keep to areas they understand, have a specific objective when putting their money in the market, and buy shares only when they think there is an attractive investment case at the current price.
In my own portfolio, I mix shares I think have a high chance of business growth with dividend shares I hope can help me build up passive income streams.
One share to consider
One share I think has both growth income and growth prospects that investors should consider — as part of a diversified portfolio — is Diageo (LSE: DGE).
The company is the force behind Guinness and spirits such as the Johnnie Walker range of whiskies. Owning unique premium brands can be a very profitable business. Indeed, Diageo’s multibillion pounds annual profits have enabled it to raise its dividend annually for over three decades.
One risk I see is sales suffering from poor forecasting. Current shortages of Guinness in some British pubs concern me, as getting the right amount of the black stuff out to pubs ought to be a piece of pie for Diageo. If it is struggling to get even that right, it makes me wonder what else management might not be getting right.
As a long-term investor, though, I like the business model and share price valuation right now. Diageo continues to offer promising dividend prospects, in my view.
This post was originally published on Motley Fool
