I've been investing in ASX shares for many years now, and as such have accumulated dozens of different investments in my portfolio (perhaps too many). But most people's investing journey typically starts with just one or two investments.
These are arguably the most important purchases you will make for your portfolio. Going for broke and buying some speculative stock could well ruin your faith in the markets if it all goes pear-shaped, and you may never invest again (much to your detriment).
So if I were starting my ASX share portfolio from scratch with $1,000 today, I would go for two investments that offer stability, protection against permanent capital loss and diversity.
Starting out: How I would invest $1,000 in ASX shares today
First up, I would go with a broad-based investment covering the top ASX shares on our share market. This is where an exchange-traded fund (ETF) can really shine. An ASX 200 ETF like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) tracks the largest 200 shares on the Australian public markets. That's everything from BHP Group Ltd (ASX: BHP) and Westpac Banking Corp (ASX: WBC) to Telstra Group Ltd (ASX: TLS) and Coles Group Ltd (ASX: COL).
The beauty of this type of investment is that you get a huge range of quality companies. You never have to worry about one of them going into bankruptcy or any other risk associated with one individual stock because there are 199 other ASX shares to spread the weight.
Plus, an ASX 200 shares ETF like IOZ has many many years of runs on the board. Since its inception in 2010, investors have enjoyed an average return of 7.91% per annum. That won't make anyone rich overnight, but it's a solid return for a first investment.
ASX shares are great and all, especially for dividend income. But an ASX ETF has two major problems in my view. The first is that it lacks companies that have truly global reach and influence. The second is that it is heavily weighted towards bank stocks and mining shares.
As such, I'm going for a different ETF to complement our ASX 200 fund that mitigates these shortfalls.
Adding the best companies in the world
The iShares S&P 500 ETF (ASX: IVV) is perfect for filling the gaps that are left from our ASX 200 fund. The S&P 500 represents the 500 largest companies that are listed on the US markets. This index is jam-packed with companies that have truly global scope and scale.
There are far too many to name, but think of the likes of Nike, Netflix, Mastercard, Ford and Coca-Cola. And that's not even mentioning the tech giants that dominate the top leagues of the S&P 500. The worldwide dominance of Apple, Microsoft, Alphabet and Amazon is hard to overstate.
That's what an investment in the iShares S&P 500 ETF represents. As you can tell, it makes up for the shortfalls of the ASX by including all of those transnational companies, as well as the dominance of tech stocks, which are not a major influence in the ASX.
So these are the two investments I would go for if I were starting from scratch today with $1,000. Both are easy, diversified investments that give you exposure to the best companies that both the US and Australia have to offer. What more could you want for your first $1,000?
