With the official start of summer arriving next month, New Year’s resolutions may seem like a distant memory. But when people decide to start investing or live more healthy lifestyles in the bleak midwinter, they typically do so for good reason. It can just be hard to turn the resolution into action!
Why? Lots of people want to start investing but keep putting it off, for a variety of reasons. Here, I want to discuss three.
Reason one: lack of money
A common justification for procrastination is a lack of funds. People think they cannot start investing until they have sufficient funds.
In reality though, it does not take much cash to begin. Indeed, starting small can mean starting sooner and with the added bonus that beginner’s mistakes can be less costly than if waiting then putting bigger sums to work.
Even with, say, between £500 and £1,000, it is possible to build a well-constructed portfolio suitably diversified across a range of shares.
One thing to watch when making small trades though, can be the potentially disproportionate impact of minimum charges. It pays to compare options when choosing a Stocks and Shares ISA.
Reason two: lack of knowledge and understanding
Another reason people do not start investing is because they feel they do not understand how the stock market works. How are shared valued? What moves their prices? What happens when a company is taken over?
This strikes me as a very good reason not to invest. Fortunately though, it is easy to solve. There are plentiful resources available that help demystify the stock market.
Once someone starts investing, they can also learn from possibly the best teacher – experience.
Reason three: not knowing what shares to buy
Another explanation for why people do not start investing even when they understand how the market works is that they do not know or cannot decide which shares to buy.
This is always a personal decision – different investors have their own objectives and risk tolerance. But there are some helpful common principles I think I can illustrate with my own ongoing investment in Card Factory (LSE: CARD).
I like to stick to businesses I feel I can understand. Retail is an area I know well and indeed I occasionally pop into my local Card Factory shop. The business strikes me as one I can relate to.
Another factor is whether a business has a competitive advantage. Here, Card Factory may be a less obvious choice than a company that sells a unique bit of kit.
Still, Card Factory does sell lots of unique products under its own name. It has its own production facilities and I see the large shop estate as a competitive advantage.
I also consider risks. In Card Factory’s case they including declining numbers of people visiting high streets and rampant stamp price inflation sending down demand for physical cards. The company’s purchase of an online rival to Moonpig might help it on that front.
Card Factory’s finances also appeal to me. Last year, revenue grew 7% and the company was solidly profitable (albeit less than the prior year).
A chunky dividend yield of 7.3% offers me passive income.
Should you invest £5,000 in Card Factory Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Card Factory Plc made the list?
Christopher Ruane owns shares in Card Factory.
