You do not need a large sum to start buying ASX shares, and a thousand dollars is a perfectly sensible place to begin.
The hardest part is not the money, it is deciding what that first purchase should actually be.
Reporting season is in full swing, which makes the market feel unusually noisy for a first-time buyer.
However, the principles that have made ASX shares work over decades do not change because a few companies are reporting this month.
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What $1,000 actually buys in ASX shares
Most CHESS-sponsored brokers require a minimum first order of $500 per security, which is known as the minimum marketable parcel.
In practice, that means one or two purchases with $1,000.
Individual share prices are important here too.
At around $178 a share, $1,000 buys you five Commonwealth Bank of Australia (ASX: CBA) shares, which is a meaningful stake in one company and no diversification whatsoever.
Concentrating a first investment in a single stock is where a lot of new investors come unstuck.
There is a psychological benefit to starting small, too. A $1,000 position teaches you how you react to a 20% drawdown, and it does so while minimising losses.
One ETF, or a handful of ASX shares?
An exchange-traded fund (ETF) solves the diversification problem in a single trade.
The Vanguard Australian Shares Index ETF (ASX: VAS) tracks the S&P/ASX 300 Index, so one $1,000 purchase gives you exposure to 300 companies.
Its management fee is 0.07% per annum, which is among the lowest on the ASX and works out at 70 cents a year on $1,000.
Alternatively, investors wanting global technology exposure often look at the Betashares Nasdaq 100 ETF (ASX: NDQ).
The ETF holds the 100 largest non-financial companies listed on the Nasdaq, although the fee is higher at 0.48% to reflect the more specialised exposure.
For reference, the local ETF industry closed the financial year at a record $372 billion in funds under management.
Watch the costs
Brokerage is the silent tax on small parcels.
A $10 fee on a $1,000 trade costs you 1% before you own anything, and paying it twice on a buy and a sell leaves you 2% behind.
Some platforms now offer zero or very low brokerage on ASX-listed products, while others charge a flat $5 to $20 per trade.
On a $1,000 starting balance, the difference can be material.
Fees compound in exactly the same way returns do, only against you.
Foolish takeaway
The first $1,000 you put into ASX shares will not make you wealthy.
What it does is start the compounding clock and teach you how you actually behave when prices fall.
Best practice: keep the costs low, avoid putting everything into one company, and plan to add regularly.
A single $1,000 purchase is a start, not a strategy.
Do it again next month, and the month after that, and the compounding takes care of the rest.
