How many people dream of entering the stock exchange – and how many actually do it? In my experience, many people dream of using the stock market to their advantage to accumulate wealth, but never actually start buying stocks.

This may be due to a feeling that they do not have adequate knowledge and understanding. However, I believe that in today’s world it is easier than ever for a tiny private investor to understand how the stock market works.

It may also be due to fear of the risks involved. As an investor, I believe that risk management is very vital. Another common reason why potential investors never start buying stocks is because they believe they need a lot of money.

This is simply not true. Here’s how I’d start buying shares for less than £500, even if I had no investing experience.

Preparation for investment

I would prepare first.

I would do the research I mentioned above, learning how the stock market works and familiarizing myself with vital concepts such as valuation and how to stay diversified even when investing just a few hundred pounds. Regardless, I would like to start buying stocks as I intended to continue.

I would then set up a share trading account or a Stocks and Shares ISA.

Setting a strategy

I would also set an investment approach and goals so that I don’t put money out into the market randomly.

This strategy may evolve as you gain more knowledge and experience. To start with, I would stick to business areas that I understood and err on the side of being too risk averse rather than not risk averse enough. I would also consider spreading your money across several stocks for diversification.

One way may be to purchase an investment fund that itself holds shares in several dozen different companies.

Finding stocks to buy

I could also start by purchasing shares in individual companies.

In my opinion, investors should consider buying the company JD Wetherspoon. The latest results released today (October 4) underline that the company is performing well.

Annual revenues increased by 6% and pre-tax profits by 74%. The company has reinstated its dividend, so it plans to pay shareholders 12 pence for each share it holds.

It has a vast potential market, although one risk I see is the failing number of pubs which could hurt demand. On the other hand, this might actually work to Spoons’ advantage as it offers economies of scale, a profitable business model and a unique reputation for affordable ales that assist it stand out from the competition.

These are the kinds of things I look at now, just as I would if I were a novice in the stock market. How huge can the customer market be, does the company have a unique reason to do well in it, how much debt does it have, and how attractive is the valuation implied by the share price? Thanks!