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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 donât 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 thatâs 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 itâs 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 donât think beginners should go for a small, or risky, ASX share to start with. Itâs 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, itâs 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.
The post How I’d invest my very first $500 in ASX shares in 2023 appeared first on The Motley Fool Australia.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Foolâs board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Foolâs board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon.com, Apple, Berkshire Hathaway, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended Coles Group, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Berkshire Hathaway, REA Group, Westpac Banking, and iShares S&p 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.