There is no better time to start investing than right now. After all, the sooner you start, the more time you have to grow your investments and consolidate gains. You don't need a lot to start investing in the ASX or even international share markets. All you need is the motivation and determination to make it work.
So, where do you start?
Start small, think big
Small contributions can add up to a big investment over time. The key is consistency. Most brokerages have a minimum trade size of around $500, but some investing applications allow smaller investments. Over time what seem like inconsequential amounts can sum up to something quite consequential indeed.
Figure out how much you can afford to dedicate to your investments, be it on a weekly, fortnightly, or monthly basis. Then set that money aside for just that. If you need to, open a separate account so the temptation to access and spend your investment funds is removed. Add to your investment fund incrementally, but regularly.
Open a share trading account
Australia has a wealth of options when it comes to share trading accounts. Investigate your options now, before you are ready to actually place a trade. Brokerages differ in terms of the interface they offer, the fees they charge, and the added services available.
Choose a brokerage that is right for you. If time is critical, having a well-developed app might be crucial so you can trade on the go. If access to timely information is important to you, consider the notification services offered by different online brokers. Figure out your priorities and see which service fits. And keep the fees in mind.
Like everything else in life, there is a cost to investing. Trading shares incurs brokerage charges. Ensure you understand the fees and charges levied by your chosen broker. These will impact on your returns. If you trade frequently, you can expect to incur more brokerage fees.
Figure out your goals
There are a universe of investment options out there. Before you contemplate picking one (or more) to invest in, you have to know why you're doing it. What are you trying to achieve? Are you looking to build a nest egg for some far off retirement? Or a portfolio of high dividend-paying shares so that you can live off the income?
Your goals and risk tolerance will influence your investment choices. Those with longer term goals can afford to take on more risk, as they have a longer time period through which to ride out volatility in returns. Less risk averse investors may prefer allocating more of their portfolio to shares compared to less risky bonds.
Your goals and risk tolerance form an overlay through which you will assess potential investments. Do they meet your needs? Do they fit with your personal requirements? Obviously, they will also need to make sense from a financial perspective.
Do your research
Start by assessing the investment landscape. There are more than 2,000 shares listed on the ASX, which itself is only a small proportion of the global investable universe. Narrow down whether you are interested in international shares, ASX shares, bonds, or something else. Ultimately, it is preferable to diversify across asset classes, although the exact mix of assets will depend on the individual.
Once you know which asset class you're focused on you can look into individual investments. If you want to diversify within a single investment class, you can consider exchange traded funds (ETFs), which are traded like shares and offer exposure to a basket of underlying securities.
There are ETFs available that provide exposure to ASX shares, international shares, fixed-interest securities, and more. ETFs such as the Betashares Australia 200 ETF (ASX: A200) or iShares Core S&P/ASX 200 ETF (ASX: IOZ) provide quick and easy access to the largest 200 shares on the ASX.
If you want to invest directly in ASX shares you will need to drill down and do further research. The companies and even industries you investigate will be informed by your goals and risk profile. If high dividends are a priority, you may look to mature, profitable companies in stable industries. If potential capital growth is more important, and income less so, you may seek out younger, more disruptive companies with high growth prospects.
Make an investment
Once you've got your plan of action, it's time to execute on it. Provided you meet minimum trade requirements with your broker, you can go ahead and place your order. But there is no need to rush. Go back and check your research. Double check that the potential investment meets with your goals and objectives.
Once you're sure of your decision you can place your trade or trades. Then, you're an investor! Congratulations! It might seem like you can sit back and take it easy from here, but that is not the case. You'll need to monitor your investment plus keep watching and researching future investment opportunities.
Remember the value of time
Don't expect everything to happen overnight. Even Warren Buffett didn't become Warren Buffett overnight. Time is one of our most undervalued assets. Time allows you to ride out periods of flat or downward returns. Time allows you to reinvest distributions to allow for future compounding returns. Time allows you to learn and grow from early investing mistakes.
For investing in ASX shares a timeline of five or more years is recommended. This allows time to ride out volatility in share prices. You should be monitoring your investments over this period, but not obsessively. Checking the price of your assets daily (or even multiple times a day) can make you susceptible to trading on price rather than fundamentals. If your investment thesis is strong, time should allow it to come to fruition and for you to reap the benefits.
Foolish takeaway
There is no time like the present to start investing. The sooner you start the sooner you can start growing your portfolio. Remember though that investing is not the same as trading. Investing also requires understanding your goals and risk preferences, researching your options, and (finally) executing on your plans.
