It is a major achievement to wrangle your finances to where you have enough money to invest. Unfortunately, some of the mentality needed to save can make the start of investing incredibly daunting.
When taking the initial leap, it can feel downright wrong to invest your hard-earned dollars into something that might decrease in value.
The saver in all of us is tugging on your ear and whispering, "That's not responsible when you can keep it in cash and get a small, risk-free return." That same little voice forgets to mention the risk of going backwards in real terms due to inflation.
If I remember my first investment, the scariest part was investing $500 — not an insignificant amount of money for me at the time — in a single company's shares. The concentrated first step meant the stakes were high from the outset. It didn't help it was an extremely speculative stock to begin with.
That's why investing in exchange-traded funds (ETFs) can be a great way to start investing.
It doesn't need to be complicated
Learning the ropes of successful investing can take some time. While I'm a huge advocate of stock picking, the truth is that one bad experience early on can prematurely end what could otherwise be a rewarding financial journey.
I was fortunate. Ole' Queensland Bauxite Limited netted me a tidy profit early, giving me the confidence to forge on. Who knows where my finances would be if the pot stock didn't deliver and I gave up on investing…
Take it from me: the prospects of long-term compounding shouldn't hinge on a no-name company winning the medical cannabis lottery. In hindsight, it was a bit of a numb-skull starting point for my objective of building wealth.
Instead, there are 3 ASX-listed ETFs I would buy if I could turn back time:
- Vanguard Australian Shares Index ETF (ASX: VAS)
- Betashares Nasdaq 100 ETF (ASX: NDQ)
- iShares S&P 500 AUD ETF (ASX: IVV)
These are passive ETFs — meaning they all track an index without any financial manager's intervention.
Three simple investments that instantly provide exposure to, in my opinion, some of the greatest businesses in the world. No need for toiling over pages of financial statements — which is the last thing most investors want to do as a beginner.
Why start by investing in ETFs?
There are a few reasons why ETFs can be a good place to start. I'd say the biggest is stability.
If you've spent weeks (maybe even months) saving to get enough money to invest, nothing will rattle you more than watching the value of a stock drop by 10% a week later. By the way, that alone wouldn't mean it's a bad investment, but it sure as hell feels like it when you've just started.
Because the three ETFs I've mentioned are diversified across literally hundreds of companies, there is a far slimmer chance of a stomach-churning move in a small timeframe. Because of this, you have more time to become accustomed to investing in shares before experiencing a shock.
Plus, having money spread across quality businesses like Nvidia Corp (NASDAQ: NVDA), Meta Platforms Inc (NASDAQ: META), and Commonwealth Bank of Australia (ASX: CBA) is a pretty appealing proposition in my view.
