Or why the Snowball only invests in Investment Trusts and ETF’s
How’s how someone could start buying shares with 5% of their salary
Is it possible to start buying shares with one twentieth of one’s earnings? This writer explains how a would-be investor could aim to go about it.
Posted by Christopher Ruane
Published 4 October
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.
Sometimes people who want to start buying shares can feel as if they might never get the chance. So many other spending priorities can pop up in life.
That is why I think it can make sense to target a specific, manageable part of one’s income for investing.
Setting a regular contribution level
How much that is will depend on an investor’s own circumstances.
Different people have different salaries – and different outgoings. For some, buying shares may be a high priority. For others, it may be something they only do on a very small scale.
In this example, I imagine someone puts 5% of their salary away each month to start buying shares and then build a portfolio over the long term.
How much that is depends on how big the salary is (and whether the person sticks to their good intentions!). It may also be that, over time, they decide to invest a higher or lower proportion of their earnings.
But I think setting a regular goal can help to build wealth over the long term, as it can lay the foundations for building a share portfolio.
Getting ready to invest
That money needs to be put into some sort of investment account. A helpful early step could therefore be comparing options for a share-dealing account, Stocks and Shares ISA, or dealing app.
While getting to grips with the nuances of the stock market is a long-term project, more pressingly I think a new investor needs at least to get to grips with key concepts like valuation and risk management before putting their hard-earned cash at risk.
Looking for quality businesses with attractive share prices
Each investor has their own approach to deciding what to buy.
Like billionaire investor Warren Buffett, I aim to buy shares in great businesses when they are selling for an attractive price.
An example of a share I have been buying lately is B&M European Value (LSE: BME).
A quick look at its share chart shows that not all investors over the past several years have shared my enthusiasm.
A chunky dividend looks attractive (and will hopefully generate passive income for me while I own the shares), but dividends are never guaranteed.
Indeed, one error some people make when they start buying shares (and sometimes beyond) is getting excited by the prospect of a dividend without asking themselves how sustainable the payout may be, based on their assessment of the company’s business prospects.
B&M has its challenges. Lately its sales of fast-moving consumer goods have been disappointing. That highlights the risk of a wider slowdown in other product categories too.
But I see a lot to like here. The company is well-known and, in a weak economy, its discount proposition may look attractive to even more shoppers. It has a large estate of shops, has been growing sales overall, and benefits from a sizeable pool of regular shoppers.
The B&M share price has just tanked. But look what’s happened to the stock’s yield
Following another profit warning today, the B&M share price fell sharply. But it’s helped push the retailer’s yield well into double figures.
Posted by James Beard
Published 20 October, 12:13 pm BST
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
It’s been a bad morning (20 October) for the B&M European Value (LSE:BME) share price. By 10am, the group’s shares were worth 17% less than they were at the start of trading. That came after the discount retailer issued another profit warning for the 52 weeks ending 28 March 2026 (FY26). It also announced the departure of its chief financial officer.
What’s going on?
It’s the group’s second profit downgrade in less than three weeks. This time it said it had identified “approximately £7m of overseas freight costs not correctly recognised in cost of goods sold, following an operating system update earlier this year”.
Should you buy B&M European Value shares today?
The group started FY26 expecting adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to be around £620m. Following weaker-than-expected sales, it reduced this to £510m-£560m. Today, based on “revised second-quarter margin run rates”, it’s cut this estimate to £470m-£520m.
For the second half of the year, it’s forecasting UK like-for-like sales to grow at between “low-single-digit negative and low-single-digit positive levels”. As we’ve seen, the difference between these two outcomes is worth £50m of EBITDA.
The announcement continues a sad decline for the group. It was ejected from the FTSE 100 in December 2024 having joined for the first time in September 2020. Since then, its share price has fallen 51%. But it doesn’t have to be like this. Frasers Group, another retailer, fell out of the Footsie on the same day. Its shares are now worth 10% more.
A huge yield
One positive outcome from the falling share price is that the stock’s now yielding 16.8%. This is based on amounts paid over the past 12 months. Of course, with earnings coming under pressure, this could lead to a cut in the dividend.
And based on its past four financial years, it’s difficult to predict what its future dividend might be. As well as making interim and final payouts each year, the group’s recently paid a series of special dividends.
| Period | Interim (pence) | Special (pence) | Final (pence) | Total (pence) |
|---|---|---|---|---|
| FY22 | 5.0 | 25.0 | 11.5 | 47.5 |
| FY23 | 5.0 | 20.0 | 9.6 | 34.6 |
| FY24 | 5.1 | 20.0 | 9.6 | 34.7 |
| FY25 | 5.3 | 15.0 | 9.7 | 30.0 |
Source: Hargreaves Lansdown
Can it recover?
On the face of it, the group has lots going for it. It’s a familiar face on the country’s high streets and retail parks. It has 1,130 stores in the UK, trading under the B&M and Heron Foods brands, and 140 units in France.
And its shops always seem busy to me. With disposable incomes remaining under pressure, it’s in a good position to capitalise with its low-cost offer.
As part of its turnaround plan, the group’s embarked on a ‘Back to B&M Basics’ strategy, which includes further price cuts, giving greater autonomy to managers to introduce ‘specials’, reducing stock lines and improving product availability. This all makes sense to me. However, it will take up to 18 months for the full impact to be felt.
But the group continues to face some possible challenges. There’s speculation that the Chancellor’s looking to shift more of the burden of commercial rates away from smaller shops to larger ones. And persistent supply chain inflation could eat away at its gross profit margin.
At the moment, there’s too much uncertainty surrounding the group’s numbers to make me want to invest. But like most retailers, Christmas is a crucial period for B&M. I shall therefore revisit the investment case once I know how it’s performed over the festive season.
If you invest, one day you will buy a clunker, how you deal with that, will determine how successful you will be.
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