This year could be a great time to start investing in ASX shares in 2023 for beginners for a few different reasons.
I think investing in ASX shares can be a great way to build wealth over the long term.
Historically, the ASX share market has returned an average of between 9% to 10% per annum. That includes dividends being re-invested, but not any relevant franking credits.
One of the advantages is that investors can begin with as little as $500. Buying a property can take a deposit of tens of thousands of dollars.
If $500 were to compound at 10% per annum for a decade, it would grow to around $1,300. But, we don't know what future returns are going to be. It could grow to an even bigger amount or less than that.
Though, over any given year, share prices can seem quite volatile. But that's normal.
Just look at how Commonwealth Bank of Australia (ASX: CBA) shares have moved over the past 12 months.
What would be a good place to invest $500?
There are a few different ways to invest for beginners.
Starting by investing in a business that we see in everyday life could be a good place to begin with. It might be more tangible for an investor to see their business in real life.
Examples of blue chips that might be interesting include Telstra Group Ltd (ASX: TLS), Coles Group Ltd (ASX: COL), Westpac Banking Corp (ASX: WBC), Wesfarmers Ltd (ASX: WES) (which owns Bunnings and Kmart), REA Group Limited (ASX: REA) (which owns realestate.com.au) and Qantas Airways Limited (ASX: QAN).
But, if it's hard to make a choice, there are ASX share investments that enable people to invest in a whole group of businesses in one investment. Investors can buy a whole basket of shares in one go. One of the most popular ways to do it is called an exchange-traded fund (ETF).
There are ETFs that investors can pick that give access to the global share market or the Australian stock market.
For example, the iShares S&P 500 ETF (ASX: IVV) is invested in 500 of the biggest US businesses. While they are listed in the US, most of them are global companies such as Apple, Microsoft, Amazon.com, Berkshire Hathaway and Alphabet (Google). ETFs can provide great diversification.
ETFs are administered by a fund manager, and that fund manager charges an annual fee. The iShares S&P 500 ETF has a very low fee of just 0.04% per annum, while there are others that can charge 1% or even more. The higher the fee, the more the long-term value of the portfolio is reduced. The effect of fees compound as well.
But, I don't think beginners should go for a small, or risky, ASX share to start with. It's good to start with an investment that has a good chance of working out well.
However, The Motley Fool website is a great place to find resources on researching ASX shares and industries.
Foolish takeaway
I think ASX shares can be a really good way to grow $500 into a larger amount over the long term. But, whatever an investor goes for, it's important to be patient. A good investment can take a while to play out into a positive outcome. Share market volatility can be painful in the short-term, but can provide opportunities to buy shares at cheaper levels.
