Beginner's Portfolio: First Purchase
This article is part of a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit the full archive on our Fool UK website.
LONDON -- We've been through the mechanics of getting a broker's account set up and making share purchases, and we have also briefly considered strategies and how to find ideas for shares to buy. So we'll move on now and start to build a beginner's portfolio, holding around half a dozen shares in top-quality companies. This is illustrative only, so we won't be investing real money -- but we hope our shares will do well over the long term, and we'll keep an eye on performance.
But our main purpose is to show how we might build a real portfolio in practice and think about how we might watch over it. So over the next few weeks, we'll "buy" our shares, keep an eye on news from or about our companies, and give a review here from time to time.
The first purchase
The first share we're going to buy is Vodafone (NAS: VOD) . Why? Well, it's a solid company in an international market that is still expanding, and I expect it to be around in a couple more decades' time.
But also of importance, I think it's a good value right now, especially as forecasts suggest a dividend of 7.4% for this year, rising to 7.7% next year and 8.4% the year after. The shares are on a modest price-to-earnings ratio of just over 10, too, which is cheaper than the market average of about 14.
Earlier this week, I had a look at how well Vodafone's dividends have rewarded shareholders during the past few years as the FTSE 100 has struggled. The total returns have been decent, and getting more than 7% a year for the next few years will do me just fine, even if the share price goes nowhere.
Let's do it
So we made our purchase earlier this week using the Motley Fool ShareDealing service, and we invested the 500 pounds that I think makes a sensible minimum investment amount. It looked like this:
As you can see, we got 289 Vodafone shares for 168.537 pence apiece and paid a fixed commission of 10 pounds and stamp duty of 2.44 pounds for a grand total of 499.51 pounds.
So that's our portfolio started, and we'll get looking for our next investment now. The next one will probably be another FTSE 100 share, and I already have a few strong ideas -- but we're open to suggestions, so please feel free to offer your ideas below.
Want to learn more about shares, but not sure where to start? Download our latest guide, "What Every New Investor Needs To Know" -- it's free. The Motley Fool is helping Britain invest. Better.
More in this series:
At the time this article was published Alan does not own any shares mentioned in this article.Motley Fool newsletter services have recommended buying shares of Vodafone Group. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.