Investing in ASX shares can be one of the best ways to grow your wealth over time. However, if you're new to the share market, it can also be very intimidating.
The good news is that getting started is easier than you might think. And with the right mindset and a few key principles, you can begin building a portfolio that sets you up for long-term success.
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Why invest in ASX shares?
Shares give you partial ownership in a company. This means that as a company grows, your investment grows with it. Some ASX shares also pay dividends, which provide regular income on top of potential share price gains.
Historically, shares have been one of the best-performing asset classes over the long run, outperforming cash and property. There's no guarantee that this will be the same in the future, but I wouldn't bet against it.
Which shares?
There are a lot of different options for investors to choose from and each has its positives (and negatives).
- Blue-chip stocks: These are large, well-established companies with a history of stable earnings. Examples include Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP). They are expected to largely deliver returns in line with the market.
- Growth stocks: These are companies expected to grow at a faster rate than the market, such as TechnologyOne Ltd (ASX: TNE) or WiseTech Global Ltd (ASX: WTC). They carry more risk than blue chips.
- Dividend stocks: These are companies that regularly pay out profits to shareholders, such as Telstra Group Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES). Dividend shares are unlikely to grow as quickly as growth stocks.
- Exchange-traded funds (ETFs): These funds track indices, sectors, or themes and can provide instant diversification. Popular ASX ETFs include the Betashares Nasdaq 100 ETF (ASX: NDQ) and Vanguard Australian Shares Index ETF (ASX: VAS). There are small fees that come out of your returns.
How to get started
- Open a brokerage account: To buy ASX shares, you'll need a brokerage account. Platforms like CommSec and Nabtrade allow you to buy and sell shares online with low fees.
- Decide on a strategy: Are you looking for long-term growth, regular dividends, or a mix of both? Your investment strategy should match your financial goals and risk tolerance.
- Start small and diversify: It is tempting to go all-in on a single company, but diversification reduces risk. Beginners should consider spreading investments across different sectors or using ASX ETFs for instant diversification.
- Invest Regularly: Rather than trying to time the market, investors might want to consider a strategy known as dollar-cost averaging. This means investing a fixed amount at regular intervals, reducing the impact of market volatility.
- Think long-term: The share market can be volatile, but history shows that patient investors are often rewarded. Avoid panic selling during downturns and focus on the bigger picture.
Foolish takeaway
Investing in ASX shares is one of the most effective ways to grow wealth over time.
By starting with the basics, staying disciplined, and thinking long-term, even beginner investors can build a strong portfolio. The key is to start early, invest wisely, and remain patient—because when it comes to wealth-building, time is your friend.
