The resolution season is nearly upon us, a time when many of us decide to set personal goals for the year ahead. Financial goals are common among New Year's resolutions, and starting on an ASX investing journey is undoubtedly one of them for aspiring Aussie investors.
I know first-hand how intimidating it can be to take the plunge. It's not unusual for the media and market 'experts' to depict share market investing as complicated, exclusive, and expensive.
But guess what… it's not. At least it doesn't have to be. Around 51% of Australians already hold investments outside of their home and superannuation, according to the ASX Australian Investor Study, providing some credence that creating wealth through investing in the share market is within reach.
Still, I get it. The unknown is daunting. Investing sounds like some secret squirrel business. And that's what I thought, too. That is until I decided to leap into the unexplored.
The way I see it, investing is one of those things that you won't learn in a textbook. No matter how many Warren Buffett quotes you learn, nothing will emulate investing quite like the real deal.
On that note, here are six no-fluff steps to help make 2024 your first year of ASX investing.
Simple steps to investing in the ASX
1. Make a budget
The dreaded budget. It might seem awfully painful to tally up your income and expenses. However, it will help ensure your financial journey is a sustainable one. A basic understanding of how much spare cash is available to you month-to-month shapes the amount that can be regularly invested into ASX shares.
Without a budget, you may run the risk of coming up short on cash for the necessities. Not only is this worrisome for your well-being, but it could also endanger your chances of sticking with investing in the long run.
Run the numbers. It's worth the effort.
2. Set a goal
Now we know how much can be regularly contributed, it's time to set a goal. Never underestimate the power of a goal. I'm no psychologist by any means, but I do know setting a personal target is useful to stay motivated and persevere.
Whether your end goal is a house deposit, an early retirement fund, or a gift for your children, including 'milestone' goals along the way can be handy. Many of our financial ambitions are large undertakings. As humans, we often need to exploit our reward system to stay on course for the long-term payoff.
For example, investing a few hundred dollars each month for a year consistently is no small feat. Celebrate it! Make your ASX investing journey a rewarding experience.
3. Take the leap
This is where it all comes to a head — investing in the first ASX share. To do so, you'll need to select a broker to purchase the shares through. Secondly, a little bit of research provides the foundations for a good investment.
From my experience, the depth of research will improve throughout the investing journey. To say my first ASX share involved rudimentary analysis would be an understatement. Each investor has a different style, a discovery that comes with time.
4. No mo' FOMO
'Hot tips' are frequently worth what you pay for them — zilch if someone at your Christmas party or New Year's celebrations swears it's your ticket to riches.
Nine times out of 10, people who vehemently try to convince others of a 'sure thing' know as much about the company as you do, despite only hearing of its existence for the first time. Don't give in to the fear of missing out (FOMO).
5. Know thyself
This is possibly the most influential step on the list. Knowing and understanding yourself is pivotal to successfully investing in the ASX.
Legends of the stock-picking arena note how much this journey is a psychological one. I'd argue behavioural mastery is more advantageous than arithmetic. Phrased another way, I believe investing is a battle that's won in the mind and not in the spreadsheet.
Be mentally prepared by getting familiar with your own risk versus reward profile, preferred style (active vs. passive), and areas of competence.
6. Stay the course
Last but not least, persevere. Investing in the ASX is not a get-rich-quick strategy. However, if all goes to plan, it could well be a plan to get rich gradually. I don't know about you, but that still sounds like an appealing proposition.
In the last 18 years, the S&P/ASX 200 Index (ASX: XJO) — with dividends reinvested — has multiplied by more than fourfold. The next 18 years could be different, but I can say I'm glad I took the plunge nearly seven years ago.
