Are you a beginner ASX investor or even just thinking about the first shares you might want to buy? Chances are, you might be a little overwhelmed with the different paths you can take. Do you follow your cousin's advice and buy an ASX bank? Or perhaps your Uber driver's recommendation to go all in on Bitcoin (CRYPTO: BTC)?
Well, this is one of those situations where there are a few 'right' paths one can take. There are also a few wrong ones, which I would argue at least one of the above scenarios fall into.
Today, let's discuss one of the right paths, at least in my view. It's one that is relatively simple, and would suit all investors at any stage of life.
It's buying two Vanguard ASX exchange-traded funds (ETFs). You might have heard of ASX ETFs, or perhaps index funds (which are interchangeable terms in many cases).
They can be thought of as package investments, representing an investment in an underlying portfolio of shares. In an index fund's case, this portfolio tracks a particular index, made up of different stocks.
A popular index here in Australia is the S&P/ASX 300 Index (ASX: XKO). This represents the largest 300 companies listed on our share market, prioritising the larger companies. That's everything from Commonwealth Bank of Australia (ASX: CBA) and Telstra Group Ltd (ASX: TLS) to JB Hi-Fi Ltd (ASX: JBH) and Ampol Ltd (ASX: ALD).
This is what the Vanguard Australian Shares Index ETF (ASX: VAS) invests in. Buying this index fund is akin to buying a small slice of 300 different Australian stocks.
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ASX ETFs for beginner investors to consider
If you follow this path, you don't have to worry about picking individual shares that may or may not do well. You are simply buying them all, and taking the market's average return. Studies show that this approach often gets results that beat most professional investors anyway.
VAS, in my view, would make a perfect first investment for an ASX beginner. However, I would also pair it with another ASX ETF and index fund from Vanguard – the Vanguard MSCI Index International Shares ETF (ASX: VGS).
Australian Shares are great and all. But the ASX represents around 2% of global stocks. It also doesn't include world-dominating companies like Apple, Amazon, Coca-Cola and Toyota.
The VGS ETF does. It invests in a range of countries' stock markets. The United States is the main contributor. But VGS also covers other advanced economies like Japan, the United Kingdom, France, Hong Kong and Singapore.
This not only gives a beginner investor exposure to many of the world's best companies, it also adds plenty of diversification to a stock portfolio.
Foolish takeaway
I think any beginner investor would be served well by building up a starter portfolio with these two ASX ETFs. They offer everything one would need to build out an effective and diversified investing portfolio.
