Want to start investing in 2024? An expert tells us where to start.

What’s on your grown-up to-do list? You know the one. That inventory you ingloriously dragged into adulthood detailing Things I Should Probably Know By Now. Common entries include how to change a tyre, how to sew on a button, how to perform CPR, how to do eyeshadow without looking like a clown, etc, etc. 

Investing is usually right up there, too. We know it’s worth looking into, but it can seem daunting, complicated, and like something that belongs to blokes in blue ties with fat wads of money.

But CommSec market analyst Steven Daghlian insists that’s not the case. With the right tools, a bit of cash (as little as $50!) and careful preparation, he says that anyone can get involved. 

"We invest in things all the time in our daily lives, from friendships to a new skill, a job, our health," said Daghlian. "They all take time, effort, a degree of sacrifice, and an initial intention that we put out there. It’s not that different from financial investing."

So let’s break down the basics.

Why invest (especially in this financial climate)?

Put very simply, investing means putting your money into something now in the hope that it will grow over time. You might invest to create some extra passive income, plan for a cushier retirement, or perhaps because you want something to pass on to your kids.

But Daghlian points to another reason for investing that is often overlooked: beating inflation. Inflation refers to the gradual rise in the price of goods and services over time. 

"One way to deal with that is to invest in assets that have the ability to return more than 2-3 per cent," says Daghlian.

What kind of investments are there? 

There are lots of investment options, and the list just keeps growing. 

There are the obvious ones like cash (earning interest on the money in your bank account), property, and commodities like gold or silver. Then there are less-tangible options. Some of the most common include:

Shares

Owning a portion (share) of a company that’s listed on the stock exchange. The value of that share can go up or down based on company performance, demand, economic factors, and more. Some shares also pay regular dividends (a portion of the company’s profits), which you can treat like extra income or automatically reinvest, compounding your investment over the long term.

ETFs (exchange-traded funds)

A managed fund that owns a portfolio of assets such as shares, bonds and currencies. Ownership of the fund is divided into units that are traded on the stock market like traditional shares. Some are themed, so there are ETFs with portfolios only in tech, healthcare, or sustainability, for example.

Cryptocurrency

A type of digital currency that allows people to make payments directly to each other through an online system. The value of these currencies is determined according to supply and demand, meaning the market can fluctuate wildly over short periods.

Bonds

Lending money to a company or a government for a set period and getting paid a fixed interest rate in return. 

Each type of investment has pros and cons. And each involves risk — some much higher than others. It’s important to understand the risk and possible return offered by an investment so you can decide what best suits your circumstances.

"At the end of the day, you want to get a decent night's sleep when you're investing," says Daghlian. "So I think it's a good idea for new investors to educate themselves sufficiently on each option and then be honest with themselves on whether or not that resonates with them."

If you need help deciding on the right investment for you, it can be worthwhile speaking to a licensed financial advisor.

What questions should I ask myself before investing?

Like most new endeavours, it’s worthwhile to approach investing with a clear intention and clearly defined goals.

Daghlian recommends asking and answering the following:

• Why do you want to invest?

• What are you willing to risk?

• What are you expecting from your investments?

• What's your time horizon (how long do you want to keep your money in the investment)? 

Okay. Let’s say I want to invest in the share market. Where do I start?

There are more than 2,300 companies listed on the Australian Securities Exchange (ASX) alone. While it’s great to have that much choice, it can also be hugely daunting for beginners. 

Daghlian recommends starting with what you know — or can easily learn through research. (You can find a company’s annual report and financial results statements by searching its name on the ASX website, for example.)

"There are times when you just can’t get around your head around what the company does or how it makes money, and that might be a sign to try something else," he said.

Daghlian says that ETFs can also be a good springboard for beginners. 

ETFs give you exposure to a diverse portfolio without having to invest in lots of individual shares. And because they are traded on the share market, they are relatively easy to buy and sell. Plus, some ETFs only require an initial investment of $50, whereas most brokers ask for a $500 minimum when you’re starting out with shares.

Once you’re ready to dive in, you can set up an online account with a broking platform, like CommSec, and follow the instructions. Or if you want someone else to do the work, you can use a full-service broker who can advise what to buy/sell and do the trading for you. That comes at a higher fee, of course. (You can find a list of stockbrokers on the ASX website.)

How much do I need to know about the share market to invest? And where can I find reliable information?

"You certainly don't need to understand every single part of the market when making one investment," says Daghlian. 

But he stresses that it’s always good to learn as much as you can about how your investment works and the factors that may affect your returns.

If you’re looking to get across the basics of investing, the Australian Government’s Moneysmart website and the ASX website can be good places to start. 

Stock’d also has a host of easy-to-understand resources covering the essentials from buying and selling to research and risk.

If you prefer info in your ears, the eight-part CommSec Invest podcast will guide you through the entire investing process from how the share market works to getting comfortable with investing and how to level up your investment.

"It’s great for starting out because it covers topics like those in a very easy and entertaining manner," says Daghlian.

To keep an eye on the market, stay tuned to the finance pages on reputable news sites, see announcements on the ASX website, and check in on the research published by major banks and brokers. 

With that info, a plan, and a bit of patience, you’ll be able to tick "investing" off your grown-up to-do list in no time.

Learn the basics about investing with CommSec, Australia's leading online broker, and get started here. 

This information has been prepared without taking into account your objectives, financial situation or needs. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to their objectives, financial situation or needs, and, if necessary, seek appropriate professional advice.

Feature Image: Getty.