Investing in S&P/ASX 200 Index (ASX: XJO) shares has never been easier.
At least as far as the actual buying and selling process goes.
It wasn't too long ago that anyone wanting to buy ASX 200 shares needed to do so via a phone call or visit to their broker.
While that's still an option – and some brokers can also offer investment advice for a fee – these days many investors choose to set up an online account and do their own buying and selling.
That's certainly my preference.
With that said, here are three things I wish I knew before I started investing in ASX 200 shares.
Time in the markets, not timing the markets
Time in the markets, not timing the markets.
It's a bit of a cliché for buy and hold investors. But clichés usually become clichés because they're based on broad truths.
As an economist with a good grasp of macroeconomic trends, it's all too tempting to try and buy into ASX 200 shares when I believe they're at a low. And then perhaps sell them when I believe the high is in.
While I might get this close to right every now and again, successfully timing the market with any kind of consistency is essentially impossible.
If it wasn't, there'd be a whole lot more billionaires sitting on the sidelines.
Rather than trying to guess what an ASX 200 share is going to be trading for next month, I wish I'd known to take the long view and invest in quality well-managed companies, operating in growing markets, that are able to keep the competition at arm's length.
Five years down the road, history shows there's a good chance these companies will be worth significantly more than they are today.
And trying to time the ideal entry often leads to missing out entirely.
A diversified ASX 200 share portfolio
Just as with timing the market, it can be tempting to try to pick a few winners out of the pack.
But investing all of your money into just a few ASX 200 shares comes with a lot more risk than spreading out your investments across a wider basket of stocks.
And those stocks should ideally operate across a range of sectors. That way if a particular sector comes under pressure – think the banking sector last month – not all of your holdings will lose value.
One thing that would have been handy to know back in the day is the potential appeal of exchange-traded funds (ETFs).
There are a number of ETFs to consider that closely track the performance of a range of ASX 200 shares. Some are sector-specific. Others are intended to track the broader benchmark. All of these offer investors instant diversification with a single share purchase.
Read, read, read…
Which brings us to the third thing I wish I knew before I started investing in ASX 200 shares.
Read, read, and read some more.
If you're like me, you probably have worked hard for the money you plan to invest.
So make sure you do your research on the companies you plan to buy into before placing your order.
Half-year and annual results should be considered a must-read. You can find these on the company websites, the ASX website, and The Motley Fool website, among other sources.
Now, these reports may look daunting at first glance. But once you get how they're put together, you can usually get the information on the ASX 200 shares that you're after fairly quickly.
Make sure to check out how the company has been performing this year compared to prior years. And investigate the growth outlook, both via the company's own guidance and any professional broker coverage you have access to.
There are also plenty of handy investment newsletters you can subscribe to. Some are free, others will charge you a subscription fee.
How ever you decide to come about your research, don't skimp on the reading.
