“I want to invest in shares. Where do I start?”
That’s a question I get asked every now and again.
Unfortunately, for one reason or another, some people come to the sharemarket with unrealistic expectations…
Beginner: “I have $2,000. But I want to build up my portfolio slowly and have $100,000 by the end of the year.”
Me: “Umm…I think you ‘won’ too many medals as a child.”
Fortunately, most beginners are more grounded and seem up to the challenge of building long-term wealth in the sharemarket – the most rewarding place to park your money over many years.
(good) Beginner: “I have $2,000 and will add $500 a month. Where do I start?“
Me: “Great! Start with some exchange traded funds (ETFs) and go from there.”
Here are five investments for (good) beginners.
5 investments for beginners
$500 – ETF – Vanguard’s Australian Shares Index Fund ETF
Imagine owning Australia’s 300 largest companies in one portfolio. That’s the Vanguard Australian Shares ETF. It costs bugger-all for Vanguard to manage the portfolio. And all you have to do is buy and hold. It will pay dividends, too.
Note: On Google Finance it appears at V300AEQ ETF UNITS.
$500 – ETF – Vanguard Total US Market ETF (ASX: VEU)
Imagine America’s biggest and best companies rolled into one mega portfolio. That’s the Vanguard US Total Market Share Index ETF. It has averaged a 14% return over the past five years. I wouldn’t expect that level of returns, but if you reinvest dividends and add money regularly over 10 to 20 years, I believe returns of 7% – 10% on average is achievable.
$500 – ETF – iShares Europe ETF (ASX: IEU)
This ETF tracks Europe’s largest companies in just one investment. iShares manages the ETF for a reasonable cost, which is less than the estimated dividend yield. While it is not risk-free, this ETF provides diversified exposure to a market that has underperformed and could be due to bounce back.
$500 – ASX share – Washington H. Soul Pattinson
I would put $500 in ‘Soul Patts’. Soul Patts has a rich history. Although you may never have heard the name it has ownership stakes in some of Australia’s best companies, like TPG Telecom Ltd (ASX: TPM) and Priceline Pharmacy. The company pays a reliable dividend to shareholders and could best be described as a ‘slow grower’.
The first month – $500 – pick your own investment
If you have $2,000 and plan to add $500 in one month, take a chance at investing in your own idea. It may be a company you are familiar with or one you have just begun reading about.
If you’re not that interested in investing – just keep adding to your ETFs!
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The Motley Fool Australia owns shares of TPG Telecom Limited and Washington H. Soul Pattinson and Company Limited. 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.