When it comes to stock market participation, Aussies aren’t afraid to go all in. That’s why over 9 million adults here have some exposure to the ASX – representing about half of the adult population. And it makes sense when you consider that investing in the market is one of the surest ways to build long-term wealth.
But there’s quite a bit to learn if you want to maximise your profits while trading in shares and stocks. And for most non-investors, that’s the principal reason they stay on the sidelines. But there are plenty of investment options that don’t require very much upfront learning. To help, here’s a list of three simple investment types that make excellent entry points for beginners.
ASX Index Funds
One of the things that makes inexperienced investors hesitate to commit their funds to an investment strategy is a misplaced belief that stock markets are risky. And in some ways, they can be. But you may be shocked to discover that the average return rate of the ASX over the past 50 years is an astounding 11.49%.
But the secret is that achieving that rate of return means investing in a group of companies representative of the entire market and having a great deal of patience. But there’s a shortcut available. ASX index funds offer shares that represent balanced underlying assets designed to track the broader market. They don’t require much research and do most of the hard work for you. All you have to do is purchase them and hold them for long-term gains.
CFDs on Well-Known Companies
Another investment type that makes a good fit for newcomers is contracts for differences (CFDs). These are investments that rely on your prediction of where a company’s share price might go over a given period. Often chosen for shorter term investing, CFDs allow you to potentially earn whether markets are rising or falling. Still, it’s also sensible to use risk management tools such as stop losses to protect your capital if the price moves unexpectedly.
To help you make educated decisions, there are CFD platforms like easyMarkets that put all of the information you need right at your fingertips. Through them, you can read pertinent news about the shares you’re considering, track market tendencies, and even see what other traders are doing with their holdings. In other words, you won’t have to go hunting for the information you need to trade successfully. It’s all there for the asking.
Income-Producing LICs and LITs
Last but not least, inexperienced investors can opt to invest in listed investment companies (LICs) and listed investment trusts (LITs). These are professionally managed funds aimed at achieving specific investment goals. The idea is simple. You (and countless other investors) provide the capital that a professional fund manager can use to invest in a basket of securities in a particular sector. And you reap the rewards of their work.
In some cases, LICs and LITs are designed to produce stable increases in share prices. And in others, the reward is a predictable income stream in the form of monthly or quarterly dividends. Either way, the result is a fairly stable return built on the expertise of a professional investor. They’re a great way for newcomers to make a profit and can be a valuable learning experience, too, if you track the movements of their underlying assets.
The Bottom Line
At the end of the day, every Aussie that doesn’t explore investment opportunities in the market is leaving money on the table that could have been in their pocket instead. And while nobody should expect to get rich quickly using the methods listed here, they are a solid way to gain market exposure when you have little investment experience. And they don’t have to be your end position, either.
As you learn more about how the markets work, you can transition to other investment types and improve your returns even more. But the key is that you’ve got to start somewhere. And now that you know these three great entry points, you have everything you need to get started on your wealth-building journey.