The share market can be an intimidating place for first-time investors. So much so, that Australians and particularly women are more likely to spend a lot more by investing in property than buying shares in a company.
Interestingly the risk and returns are relatively similar, although Australian shares did a lot better last year compared to property.
But if you’d like to get into the stock market, Exchange Traded Funds (ETFs) are a great way for new and experienced investors to get exposure to a broad range of companies or industries at once.
What are ETFs?
Essentially, ETFs are a one-stop-shop in diversified investing. ETFs can be bought and sold through an online brokerage account exactly how you’d buy shares in a single company.
ETFs track indexes or groups of assets, for example, the top 200 companies on the Australian Stock Exchange (ASX).
There are a huge number of ETFs listed on the Australian Securities Exchange that you can buy yourself. ETFs track all kinds of indexes, in Australia and internationally.
They also track industries such as banking, energy, healthcare, consumer staples, telecommunications as well as property, bonds, currencies, commodities and precious metals.
Unlike managed funds, they don’t require a huge initial investment (managed funds generally require upwards of $5,000 to start and they have much lower fees.
Buying and holding stocks in individual companies lacks diversification, if you buy Telstra or Woolworths your money is very concentrated, you’re not spreading your risk.
How much should I invest?
You can start investing yourself through an online broker with a minimum of $500. But you’ll need to factor in that each time you buy, you’ll be hit with a brokerage fee of around $20-30. With this in mind, it may be worth saving up a bit more before taking the plunge.
If you don’t have that kind of money at hand, another option is to invest your spare change from your everyday purchases using the Acorns app.
Acorns is one of a growing number robo-advisors who invest in ETFs for you.
A robo-what?
For a fee, robo-advisors invest, monitor and rebalance a portfolio of ETFs for you and allow you to top up your investments over time.
Through an online questionnaire that queries your investment goals and appetite for risk, the robo-advisor’s algorithm provides you with a mix of the best investment options to meet your financial goals.
With house prices high in many areas and banks offering low interest rates on savings accounts and term deposits, stock market investment presents an alternative to growing your wealth.
And when you’re rich, you can be the laziest girl you like.
