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How to invest in shares for beginners

Tristan Harrison
standing at the start line

Are you a beginner investor who wants to start investing in shares? Great!

Investing in shares is one of the best things you can do to grow your wealth. Shares have delivered an average return of 10% per annum, which sees $1,000 double into $2,000 in just over seven years when you re-invest the dividends and benefit from compounding.

But, it’s important to recognise that it isn’t every share that individually produces returns of 10% per annum. The returns of Woolworths Group Ltd (ASX: WOW) will be very different to the returns of Macquarie Group Ltd (ASX: MQG) each year. Collectively, all of the ASX shares produce that 10% average return.

How do you invest? 

First you have to select a share broker. There are lots of options to choose from, so there are sites like Mozo, Finder or Canstar that allow you compare different providers.

Most people end up starting with their bank’s share trading service. For example, Commonwealth Bank of Australia (ASX: CBA) has CommSec and National Australia Bank Ltd (ASX: NAB) has NABtrade.

Once you’ve applied for and opened the share trading account you just need to put some money (at least $500) into the bank account that the broker is linked to and then you’re ready to choose your first investment.

Trades can only be completed when the market is open during weekdays. You just need to search for the ticker of the investment you want, like ‘NAB’, and buy how much you want.

Where to invest first 

This entire website and the Fool’s purpose is to help you choose the best shares for your portfolio.

I think a good starting investment is either something you know of, or a diversified investment which is invested in a variety of other shares.

An exchanged-traded fund (ETF) offered by Vanguard is like the Aldi of investing. Vanguard has a very very cheap investment management service. Some ETFs are invested in hundreds or even thousands of businesses themselves, so your investment is very diversified.

For example, Vanguard MSCI Index International Shares ETF (ASX: VGS) is invested in over 1,000 businesses. With your investment you get a small piece of Microsoft, Apple, Amazon, Visa, MasterCard, Starbucks, Royal Bank of Canada, Nike, PayPal, American Express, LVMH, Unilever, Sony, Adidas, Vodafone, L’Oreal and so on.

If you want to invest directly in something you know on the ASX then I think a growth share like Webjet Limited (ASX: WEB) or A2 Milk Company Ltd (ASX: A2M) could be a good pick at today’s prices.

Foolish takeaway 

Investing in shares is a great idea for the long-term, the two most important things is to stay invested – reduce trading activity and hold during downturns – and keep adding more money to your investment portfolio. Sadly $1,000 will not turn into a $1 million for a very long time. 

The post How to invest in shares for beginners appeared first on Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of A2 Milk and National Australia Bank Limited. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019