Investing in ASX 200 shares as a beginner is exciting. There are endless companies to research and a lot of media content to read.
The S&P/ASX 200 Index (ASX: XJO) has rebounded strongly since March and many investors want in on the action.
However, amidst all the market noise, it can be hard to know the dos and don’ts with ASX 200 shares.
Here are a few top tips I wish I had known before I began my investing journey.
1. Diversify across ASX 200 shares
It’s easy to see a hot stock like Afterpay Ltd (ASX: APT) and be tempted to go all-in. However, this is not a wise, long-term strategy.
There are always hot ASX 200 shares but this growth will come and go. It’s best to spread your risk across a number of shares rather than putting all your eggs in one company’s basket.
This can be done in a number of ways. For instance, you could buy a handful of top shares that you like in different industries or sectors.
Another approach is to gain instant diversification by using exchange-traded funds (ETFs).
ETFs invest in a portfolio of shares, and you can buy units in that diversified fund on the ASX.
A couple of examples are Vanguard Australian Shares Index ETF (ASX: VAS) or ETFS FANG+ ETF (ASX: FANG). These funds seek to track the S&P/ASX 300 Index (ASX: XKO) and the NYSE FANG+ Index, respectively.
2. Invest, don’t gamble
On the one hand, that’s fantastic news. That means more Aussies are investing their money and building their future wealth. However, that also means many are likely making short-term trades.
To be clear, good investors like Warren Buffett buy and hold companies for the long term. Short-term investors are essentially gambling on each day’s ASX 200 share price moves.
Be more like Buffett and less like the gambler.
3. Trust your strategy
Once you’ve decided on your strategy, try not to worry too much. It’s easy to stress about the daily moves in your portfolio as a beginner.
However, you have to remember that you’re investing in your long-term future. That means you can ignore the day-to-day noise and focus on buying high-quality ASX 200 shares that can perform for the decades ahead.
Don’t waste money trying to time the market, or buying and selling out of your positions. That will cost you a lot of time, effort, taxes and transaction costs.
Instead, just sit back, relax and enjoy the ride.