Does it take a lot of money to start investing in the stock market? The answer is a resounding no! In fact, I think there can be benefits to starting in the stock market on a modest budget.

£25, one portfolio – and bags of ambition!

Say, for example, that someone has a spare £25 and wants to start buying shares. On its own, that will not buy much. But if that is the start of an ongoing investment habit, it could soon add up. Twenty-five pounds a week amounts to £1,300 a year.

That is a decent amount of money to invest and big enough that it has several advantages. It can be spread across multiple shares, helping to reduce risk through diversification.

It would also be less impacted by minimum charges. For example, say a stockbroker charges 1% dealing commission, with a minimum £4.99. That may not sound like much, but on a £25 investment it actually equates to 20%. On £1,300 – even spreading it across three different companies for diversification – it would only equate to 1%.

Given how such charges can add up, it makes sense to compare options when deciding how to start investing, whether in a share-dealing account, Stocks and Shares ISA or trading app.

Getting to grips with how to invest

Diversification is only one of the elements a new investor should seek to understand. It is also important to grasp important stock market concepts like how to value shares.

Just like Jaguar or Bentley may be lovely cars, they can be bad buys if the purchase prices are too high. Similarly, in the stock market, a good business does not automatically make for a good investment – that depends on what you pay.

Balance sheets, cash flows, risk analysis and similar things may not sound exciting. But investing is not always exciting!

If you seriously want to start investing to try and build wealth, even with £25 a week, it is important to try and learn how the market works and what matters.

Where to start?

With hundreds of companies listed on the London exchange, it can be overwhelming deciding what shares to buy. One I think is worth considering, for investors not ethically opposed to tobacco shares, is Imperial Brands (LSE: IMB).

The demand for cigarettes is shrinking in many markets – and that looks set to continue. Imperial’s business remains heavily reliant on cigarette sales, so that is a risk to revenues.

However, its brand portfolio gives it pricing power. Also, while the cigarette market is shrinking, it remains large and is likely to do so for years and perhaps decades to come.

Imperial’s brand portfolio and distribution network also gives it the opportunity to expand its non-cigarette tobacco business, an area in which it has lagged some competitors.

With its 5.6% dividend yield, the share also offers strong passive income prospects.

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Christopher Ruane does not hold any positions in the companies mentioned.