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The 1 thing ALL new investors should do when they start

Are you just getting started in share investing, or thinking about starting?

This is my advice to you:

Don’t buy trendy, interesting, sexy, or seemingly ultra-attractive investments.  

You don’t have to avoid them forever, of course. Plenty of game-changers and high tech businesses are great investments, and can make a lot of money for shareholders. Yet when you are just getting started, you may lack the insight or experience to tell the difference.

A while after I started investing, I remember the Next Big Thing was Liquefied Natural Gas, or LNG. Sure enough, it was a big thing, but many companies invested in LNG and supply surged, crushing prices and profits for most in the sector. Companies like Origin Energy Ltd (ASX: ORG) and Santos Ltd (ASX: STO) that were in vogue at the time have proved disastrous long-term investments.

Nowadays the hot stocks are lithium miners and marijuana companies. And there are always plenty of hot tech stocks showing up and trying to wow investors, often with nothing to show except very few revenues and a weak financial position.

When you start investing, there are many ways to get tripped up by trying to outsmart the market, or do too much, too fast.

Do buy reliable, boring, and stable.  

Instead, buy something stable, boring, and safe. Retail conglomerate Wesfarmers Ltd (ASX: WES) is an ideal example. Through its Officeworks, Coles, and Bunnings super-stores, this company’s modest growth in earnings over time has delivered big rewards and attractive dividends for shareholders.

What’s more, the retail business reliably generates cash and these brands have a strong market position, allowing Wesfarmers to maintain its dividends and comfortably pay its debts. Owning Wesfarmers also avoids the complexity and unpredictability inherent in industries like mining and finance. Commonwealth Bank of Australia (ASX: CBA) is the one dividend stock new investors usually turn to, but I haven’t met many household investors that fully grasp the risks and rewards of the banking – or the airline – industry.

Another perfect example for newbies might be Bapcor Ltd (ASX: BAP), the automotive parts distributor with a growing store network. It’s as boring as they come – and may even be a little expensive – but there’s nothing boring about taking market share from competitors.

Once you’ve got a few stable companies in your portfolio, have read a few annual reports, and maybe been investing for a couple of years, then you can start looking at the smaller, riskier, and potentially more profitable companies. With any luck, and a little patience on your part, a slow-and-steady entrance to the stock market will keep you from getting swept up in excitement, and possibly losing a lot of money in the process.

3 Top ASX Blue Chips for Beginners in 2017

For many, blue chip stocks means stability, profitability and regular dividends, often full franked..

But knowing which blue chips to buy, and when, can often be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

If you're expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you'll be sorely disappointed. Not only are their dividends growing at a snail's pace, their profits are under pressure too due to the increasing competitive environment.

The contrast to these "new breed" blue chips couldn't be greater... especially the very real prospect of significant share price gains, something that's looking less likely from the usual blue chip suspects.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia owns shares of Bapcor. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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