Just starting out? Just start here. With Washington H. Soul Pattinson & Co. Ltd (ASX: SOL), V300AEQ ETF UNITS (ASX: VAS) and ISHEUROPE CDI 1:1 (ASX: IEU).
"I want to invest in shares. Where do I start?"
That's a question I get asked every now and again.
Unfortunately, for one reason or another, some people come to the sharemarket with unrealistic expectations…
Beginner: "I have $2,000. But I want to build up my portfolio slowly and have $100,000 by the end of the year."
Me: "Umm…I think you 'won' too many medals as a child."
Fortunately, most beginners are more grounded and seem up to the challenge of building long-term wealth in the sharemarket – the most rewarding place to park your money over many years.
(good) Beginner: "I have $2,000 and will add $500 a month. Where do I start?"
Me: "Great! Start with some exchange traded funds (ETFs) and go from there."
Here are five investments for (good) beginners.
5 investments for beginners
$500 – ETF – Vanguard's Australian Shares Index Fund ETF
Imagine owning Australia's 300 largest companies in one portfolio. That's the Vanguard Australian Shares ETF. It costs bugger-all for Vanguard to manage the portfolio. And all you have to do is buy and hold. It will pay dividends, too.
Note: On Google Finance it appears at V300AEQ ETF UNITS.
$500 – ETF – Vanguard Total US Market ETF (ASX: VEU)
Imagine America's biggest and best companies rolled into one mega portfolio. That's the Vanguard US Total Market Share Index ETF. It has averaged a 14% return over the past five years. I wouldn't expect that level of returns, but if you reinvest dividends and add money regularly over 10 to 20 years, I believe returns of 7% – 10% on average is achievable.
$500 – ETF – iShares Europe ETF (ASX: IEU)
This ETF tracks Europe's largest companies in just one investment. iShares manages the ETF for a reasonable cost, which is less than the estimated dividend yield. While it is not risk-free, this ETF provides diversified exposure to a market that has underperformed and could be due to bounce back.
$500 – ASX share – Washington H. Soul Pattinson
I would put $500 in 'Soul Patts'. Soul Patts has a rich history. Although you may never have heard the name it has ownership stakes in some of Australia's best companies, like TPG Telecom Ltd (ASX: TPM) and Priceline Pharmacy. The company pays a reliable dividend to shareholders and could best be described as a 'slow grower'.
The first month – $500 – pick your own investment
If you have $2,000 and plan to add $500 in one month, take a chance at investing in your own idea. It may be a company you are familiar with or one you have just begun reading about.
If you're not that interested in investing – just keep adding to your ETFs!
