Starting your investing journey can seem daunting, but the good news is that you don't need a fortune to begin building wealth.
With just $1,000 and a bit of discipline, a stock market beginner could be well on their way to achieving financial freedom in the years to come.
Here's a simple plan to help ASX share beginners get started in 2025.
Step 1: Invest in quality
The ASX is home to a range of high-quality businesses and exchange-traded funds (ETFs) that can form the foundation of a solid investment portfolio.
For example, high-quality companies with strong track records of growth, such as Goodman Group (ASX: GMG), ResMed Inc. (ASX: RMD), and CSL Ltd (ASX: CSL), could be great starting points. They have grown materially over the past decade and appear well-placed to build on this over the next decade.
The key is to focus on quality. Look for businesses with strong balance sheets, reliable earnings, and long-term growth prospects.
Alternatively, ETFs like the Vanguard Australian Shares Index ETF (ASX: VAS) or iShares S&P 500 ETF (ASX: IVV) provide investors with exposure to hundreds of companies with a single click of the button.
By investing in companies or ETFs that consistently perform, you set yourself up to benefit from their ongoing success.
Step 2: Let compounding do the heavy lifting
Compounding is an investor's best friend.
It supercharges your investment portfolio as your returns generate even more returns over time.
It explains why an investment of $1,000 earning a return of 10% would turn into $1,100 after one year but $6,700 after 20 years.
The longer you are invested in the share market, the harder compounding works.
Step 3: Invest regularly
Starting with $1,000 is great and can grow materially in time.
But if a stock market beginner really wants to build wealth, they are going to need to add to their portfolio regularly.
For example, if you contribute an additional $250 per month to your portfolio, and your portfolio grows at 10% annually (in line with historical market returns), you would have $53,000 after 10 years.
But don't stop there! Keep that up for 20 years, and you're looking at a portfolio worth approximately $190,000.
And for 30 years, you would have a portfolio valued at approximately $540,000.
Foolish takeaway
The most successful investors think long term. By investing in high-quality ASX shares or ETFs, letting compounding work its magic, and regularly adding to your portfolio, a stock market beginner could turn a modest starting amount into significant wealth.
The key is to find an investment plan that works for you and stick with it through thick and thin. If you do, your future self will undoubtedly thank you!
