Education General tips for a newbie to shares please?

Hi everyone

Appreciating these sub forums and working my way through reading the many posts. I’m also researching online.

Shares are completely new to me, and I’m trying to get an understanding of it all. I’ve got a grasp on the basics, types, dividends etc but there is obviously a lot more to learn.

Current goal is to diversify, and make the most of leftover current and ongoing savings. If it goes reasonably well, aiming for 5-10 years, perhaps ongoing.

I will be looking at a 10k investment initially, and much more along the way depending on how it goes. I also have a capital gains loss to offset when selling.

Understanding that it may limit returns, but I’m more comfortable looking at pooled passive ETF funds as a newbie. I may then move to more managed funds. And maybe one day individual LICs etc.

I’m still looking into it but thinking Vanguard ETFs for the ASX as a start for experience and while I learn more.

I’m continuing to read and learn all I can take in, but would very much appreciate any general tips/pointers you can share for a newbie to all of this, and understand that it is not advice. Many thanks.

 

Wealth of knowledge on this site: Passive Investing Australia

Then anything you want to discuss further or more complex/personal scenarios, feel free to ask around here.

All the best

 

Keep it simple is the short answer.

You've nailed it on the ETF side. Its simple and reliable and sure, you won't land a 10 bagger but you're not going to see holding go to zero and circa 9% a year return over the long term is actually pretty decent.

I started off with individual shares before eventually selling down most of the portfolio and now Im mostly in ETFs.
Nothing wrong with taking a speculative position on the next big thing, but keep 80-90% of your investments in plain old index ETFs.

Speaking of, avoid any small fund and pretty much all of the thematic etfs. Just stick to the main indices.

For what its worth I use Vanguard for no particular reason but the others all much the same. The majority of my ETF holdings (and all of my super) are VAS and VGS. Done. Simple.

The heavy lifting is done by the small but regular contributions you make, not from splitting hairs over minuscule differences in fees or returns.

Having just one two ETFs in the portfolio also has the psychological benefit of being able to see your investment grow vs having your money spread thin and wide.

IMO shares are super basic and easy but hidden behind a veil of jargon to make them seem more complicated than they are. Its the psychology/disciple of staying the course and not getting too clever thats the tricky bit.

 

Thanks Sgav, appreciate it. That site was really helpful and targeted, and I love the way they explained things, much more user friendly than some I’ve been looking at.

Their info re questions and misconceptions explained was particularly helpful.

Good point. Perhaps a question to ask should have been if a pooled passive ETF fund is a good start for beginners. I’m looking at this as it seems to be the most straightforward but there is still much to learn.
Apologies, quoting isn’t working on my phone atm.

 

Thanks very much MB18.

Vanguard was recommended by a few people, and I appreciate that it seems pretty straightforward and they do both ASX and international pooled ETFs.

The jargon as you mentioned has been confusing, and I found looking at anything not a pooled ETF fund to be pretty complex.

I can understand most of the graphs re performance, but lack the understanding (time and capacity) about what influences it. Considering my risk appetite, which I’ve learnt about from this helpful forum, and not being very savvy with these things, I thought it would be a good starting point, and an option to continue with long term if needed.

I like your point about a few individual ETFs as well as pooled funds.

Thank you. Staying power will absolutely be the test, understanding that it will go up and down, thinking more long term than quick gains, some research and looking at pooled rather than individual ETFs initially has helped me get to this point; and experience is the next step.

Sorry, quoting isn’t working on my phone

 

@Ash11 the term pooled is primarily used in the context of investments via superannuation. Which can be ETFs too.

Outside of Superannuation, if you purchase ETFs personally, say through a Commsec / Selfwealth / Stake brokerage account, you don't need to worry about any 'pooling'. You own the assets directly, and all of the tax or benefits are assigned to your assets in the accurate portion.

Bigger picture, you could sort of use the term pooling with ETFs, as a group of people can all buy the same ETF, and then the owner (Say Vanguard) buys shares on behalf of everyone, but it's not really how the term is used. This part, isn't really important, but you can delve in to the inner working of HOW etfs work if you want, but the key point is the broad based index, low cost ETFs (often the ones like Vanguard, or Blackrock) are very tax effective and fair. Be careful with thematic ETFs - e.g. an ETF that invests in 'AI' or 'Lithium batteries', lots of research to show they aren't as effective in the long run.

 

Thanks very much Sgav, and for explaining it so nicely too, appreciate it. Sorry yes, very poor choice of wording, understanding that the money from investors is pooled and the shares form the fund/investment. My super statements referencing pooled investments did confuse me, thanks for mentioning that.

I’m weary of specific ETFs for the moment, understand that some people do very well, but have heard the horror stories and I have friends that have lost substantial amounts, one in particular outright lost $500k over a period.

Their experiences initially put me off until I learned that they had invested in individual ETFs and LICs, likely the small and/or thematic ones yourself and MB18 have mentioned, and penny/cheap stocks.

The broad index ETF funds alleviates my concerns about my friends’ experiences, I haven’t looked into this before as the ability to invest has happened only recently for me, and didn’t realise that there were other options available.

Understanding that there’s still risk and a lower return, but this approach sits a lot better with me for now at least. Thanks Sgav