Investing regularly in ASX shares could be an excellent way to create long-term wealth, starting in FY24 with $100 a week.
Over the long term, the ASX share market has returned an average return per annum of around 10%. If $1,000 grew by 10% per annum, it'd become $2,000 in less than eight years and more than $4,000 in under 15 years.
Of course, share prices move up and down regularly. But, over time, we've seen share prices rise, thanks to business profits collectively rising.
There is uncertainty with inflation and interest rates at the moment, but it's fear that can cause share prices to drop and offer us cheaper prices. Certainly, FY24 could be a great time for beginners to start investing.
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Invest $100 a week
One of the great things about investing in the share market is that it doesn't take a lot of money to start. This can work very well for young investors or those on tight budgets who can only manage to invest a small amount, even if it's $1,000 a year.
Most brokers typically require investors to invest a minimum of $500. Though it could make sense to save around $1,000 before each investment to save on brokerage.
If I started investing from scratch and made my first investment in, say, Telstra Group Ltd (ASX: TLS), then 100% of my portfolio would be allocated to just one business, which isn't good diversification.
Investing in an exchange-traded fund (ETF) could make sense because that's buying a portfolio in just one investment. That gives us instant diversification. We can then add individual ASX shares to our investments in the future if we want to.
There are many different ETFs on the ASX to choose from. Two great places to start investing could be Vanguard MSCI Index International Shares ETF (ASX: VGS) and Vaneck Morningstar Wide Moat ETF (ASX: MOAT).
The VGS ETF is invested in the global share market with well over 1,000 positions, so it's very diversified. The biggest weightings are to global superstar companies like Apple and Microsoft.
The MOAT ETF represents a portfolio focused on investing in companies with strong competitive advantages. These are expected to endure for at least over a decade and the businesses are purchased when they're at an attractive price.
If a beginner investor didn't want to choose an ETF, a good option is to choose an S&P/ASX 200 Index (ASX: XJO) share that offers some sort of diversification within its operations– and has demonstrated a good long-term track record of wealth creation.
Investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) has been operating for more than a century. It has a diversified investment portfolio across resources, telecommunications, financial services, swimming schools, agriculture, and so on.
Wesfarmers Ltd (ASX: WES) is another company that owns a number of different businesses including Bunnings, Kmart, Officeworks, a 50% stake in a large lithium mining project, and a chemicals, energy and fertiliser division (WesCEF).
Compounding potential
If we invested $100 a week into ASX shares and the portfolio returned 10% per annum, it could compound into $165,000 after 15 years. Of course, investment returns aren't certain though. They could be weaker or stronger than 10% per annum.
