ASX shares can be a great investment for the long term. The current economic situation looks like a good time to start investing with $500 (or with a larger amount).
We don't need much to start investing on the stock market. It can take tens of thousands of dollars to invest in a property, while some online brokers will take just a $500 investment for an ASX share.
There is a lot of uncertainty with the level of inflation and the rising interest rates. The RBA increased the cash rate by another 25 basis points to 4.35%.
This can create a good investing environment. As Warren Buffett once said:
Be fearful when others are greedy and greedy when others are fearful.
We are usually presented with the best opportunities when market fear is at its peak.
Where to start investing in ASX shares in November?
A good place to start investing can be an ASX share that we know and believe is a good business.
I'd like to point to the company Wesfarmers Ltd (ASX: WES) as an idea. It's not a name that everyone knows, but the businesses that it operates are some of the most well-known retailing brands – Bunnings, Kmart and Officeworks. It also owns Target, Priceline and Catch, so it's one of Australia's strongest retailers.
Those core businesses have done very well over the long term for Wesfarmers. I think it can keep performing as it expands its store network, and makes bolt-on acquisitions (such as Beaumont Tiles). It's also expanding into areas with an attractive long-term outlook such as lithium and healthcare.
Wesfarmers has already been around for many decades, and I think it will be successful for many years to come. As a bonus, the company usually pays a decent dividend yield each year.
Another investment style to consider is investing in ASX growth shares. Sometimes these businesses go through sizeable declines, but the idea is company XYZ will be a much larger business in five years from now, creating long-term shareholder value. Imagine being able to invest in McDonald's many years ago when it had 1,000 outlets – it now has over 40,000 locations. Of course, there's volatility on the journey, but it can become a much bigger business and that's where the opportunity is – in the long term.
I recently invested in affordable jewellery business Lovisa Holdings Ltd (ASX: LOV). It's recently expanded into numerous countries, there's an opportunity for it to significantly expand the global store network size. I plan to hold it at least until it reaches 1,600 stores.
ETFs can also work
Exchange-traded funds (ETFs) can also be a good place to invest. These are funds, usually with low costs, that allow us to invest in a basket of ASX shares or global shares in just one investment. That gives us instant diversification and means we don't have to manage the portfolio ourselves. An ETF can enable us to achieve returns that beat a fund manager.
I think one of the most effective ETFs for this passive style of investing is the Vanguard MSCI Index International Shares ETF (ASX: VGS) which invests in over a thousand businesses from across the global share market.
There are also ETFs that are more specific, such as the Vaneck Morningstar Wide Moat ETF (ASX: MOAT) which aims to invest in businesses with strong competitive advantages that are expected to endure for two decades. The businesses are only bought for the MOAT ETF portfolio if they're trading at good value for what Morningstar analysts think. I think it's an effective investment method that has achieved good results over the long term.
