Now is a great time for beginners to start buying ASX shares. Yes, the market is volatile and the coronavirus pandemic has caused a lot of uncertainty.
However, that also presents a buying opportunity. On top of that, the August earnings season is really heating up.
That means ASX shares could see their prices rise or fall based on their latest earnings updates.
Here are 3 investing tips I would have liked to have known when I first started buying ASX shares.
1. Buy high-quality ASX shares
This is the first and arguably most important step. It's often tempting to punt on penny stocks when you first start trading.
While small-cap ASX shares can generate strong returns, they are also riskier than blue-chip companies.
If you're just setting up your portfolio, I think it's good to have some cornerstone investments.
That could be a high cash flow company like BHP Group Ltd (ASX: BHP). It could also be a company with a strong growth profile like Polynovo Ltd (ASX: PNV).
2. Seek out diversification
While it's tempting to put all your money in one hot stock like Afterpay Ltd (ASX: APT), this is really not a wise choice.
Spreading your risk across multiple high-quality companies is a good idea. This reduces company-specific risk while keeping your returns high.
This can be achieved by buying a few blue-chips like BHP or CSL Limited (ASX: CSL). Another option is to buy a broad market exchange-traded fund (ETF) like Vanguard Australian Shares Index ETF (ASX: VAS).
3. Don't overtrade with your ASX share portfolio
Overtrading is a trap for young players. Every time you buy or sell ASX shares you'll incur brokerage and tax expenses.
The S&P/ASX 200 Index (ASX: XJO) has been volatile in 2020, which makes it tempting to buy and sell various companies.
It's worth recognising your own behavioural flaws. If you can see where your psychological weaknesses are, you can help to mitigate the impact of these on your investment returns.
Foolish takeaway
These are tough economic times and it can be scary to invest in ASX shares right now.
However, with just a few easy tips, you can set your portfolio up for long-term success in 2020.
