For most Australians, December is one of the most expensive months of the year, for obvious reasons. With gifts to sort, hams to buy, and trees to decorate, it can be difficult to find spare cash to set aside during the silly season. However, if anyone does want to start their stock market investing journey this December, all you need to start buying shares is $500.
As it currently stands, $500 is the minimum amount you can trade on the stock market at any one time.
If you've never bought ASX shares before, that $500 could well be the best money you will ever spend in your life.
But while deciding you want to invest in ASX shares is a momentous step to take in one's financial journey, it is only a first step.
Let's talk about how to actually start buying shares this December.
How to start buying ASX shares with $500 this December
Once you have your $500 ready to go, the next step a potential investor will need to take is to find a broker. A broker is the business that investors use to buy and sell shares on their behalf. In years gone by, this would be an actual person working at a bank or brokerage house. But today, most investors use an online brokerage platform. These are cheap and easy, and suit investors of all experiences.
Traditionally, the brokerage platforms run by the major Australian banks have been investors' first port of call. Commonwealth Bank of Australia (ASX: CBA)'s CommSec and National Australia Bank Ltd (ASX: NAB)'s NABtrade are both popular choices.
But there are other options out there, too. These range from Stake and Superhero to eToro, Moomoo, and Interactive Brokers.
Each of these platforms offers broadly the same service. I would advise anyone new to the sharemarket to check out a few of these and see which ones feel most comfortable and easy to navigate.
Once you open an account with a broker, you will have the opportunity to move your $500 into an account. Once those funds have been transferred over, you are ready to buy your first ASX shares.
The next step to invest that $500 is to find a suitable investment.
Choosing your first investment
There are literally hundreds of companies that you can buy shares in, just on the ASX alone. Everything from Coles Group Ltd (ASX: COL) and Telstra Group Ltd (ASX: TLS) to JB Hi-Fi Ltd (ASX: JBH) or Ampol Ltd (ASX: ALD).
The sheer range of options can be very intimidating in itself. That's why I advocate a more diversified investment for a first timer. The stock market not only houses shares of individual companies, but also companies and funds that invest in other shares on behalf of their owners.
These investments do the hard work for you, buying and selling shares on your behalf. Index funds, for example, are a popular choice for new investors. They work by holding a large swathe of other companies, giving investors inherent diversification.
An index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ), for example, simply holds the largest 200 companies listed on the Australian share market. That's everything from CBA and NAB to Telstra and Coles. An index fund like IOZ 'rebalances' itself every three months to ensure that it always accurately reflects those 200 shares.
This means an investor can buy into the fund and put it in the proverbial bottom drawer, as it will always return the average of what the Australian share market generates. That's been about 8.3% per annum since 2010.
There are other ASX index funds that offer something similar. These range from the Vanguard Australian Shares Index ETF (ASX: VAS) to the BetaShares Australia 200 ETF (ASX: A200).
Clicking the buy button
Whichever share or index fund you choose, you will need to note its ticker code (for example, IOZ for the iShares S&P/ASX 200 ETF). Your brokerage platform's website or app will have a 'buy and sell' function. That's where you will input the ticker code, find your investment and then have the option to buy shares if the market is open. A market order will buy shares at the best available price, so all you have to do is choose how many shares you wish to buy with your $500.
Once the trade has executed, you will be notified that you have made your first ASX investment. Congratulations on taking a real step towards building wealth.
