Here’s how I’d dip my toe in the Aussie stock market with $500

$500 is the minimum spend you have to fork out if you want to buy a parcel of ASX stocks the conventional way. There are other ways of investing in the stock market that require less upfront capital. But a good rule of thumb for a beginner investor is to start with $500.

So if you’ve never invested in the ASX stock market before, but you have your $500 saved up and ready to go, where should a beginner investor turn to?

Well, here are three investments I would recommend for a beginner investor who wants to dip their toes in the proverbial ASX waters of investing.

2 ASX stocks I would recommend for a beginner investor

Australian Foundation Investment Co Ltd (ASX: AFI)

The Australian Foundation Investment Co, or AFIC for short, is the first ASX share I would recommend to a beginner. AFIC specialises in investing in shares on behalf of its investors. So there’s almost no effort required on the investor’s behalf.

This ASX share is what’s known as a listed investment company (LIC). This means it invests in other shares rather than running a conventional business itself.

AFIC has been doing this for almost a century and has a long track record of delivering solid and stable returns. Investing in AFIC shares is really investing in a portfolio of ASX’s best blue-chip businesses.

On the latest data, its top portfolio positions include the likes of BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Woolworths Group Ltd (ASX: WOW) and Telstra Group Ltd (ASX: TLS).

But AFIC maintains this portfolio of shares itself. So there’s no need for its investors to worry about picking the best investments.

According to the company, AFIC shares have returned an average of 9.6% per annum over the past five years, including dividend and franking credit returns.

Vanguard Australian Shares Index ETF (ASX: VAS)

Another investment all investors should consider in my view is this exchange-traded fund (ETF). Index ETFs like this one from Vanguard, work by simply tracking a collection of shares that are weighted by company size (market capitalisation).

In this ETF’s case, this fund holds the largest 300 shares in the Australian share market. That’s everything from CBA, BHP and Woolworths to Coles Group Ltd (ASX: COL), Westpac Banking Corp (ASX: WBC) and Harvey Norman Holdings Limited (ASX: HVN).

In the same vein as AFIC, this ETF doesn’t put any onus on the investor to select individual shares to invest in. You just buy the ETF, and get the largest 300 companies in Australia in one investment.

This ETF has also delivered strong returns for investors over many years. Over the five years to 31 March, the Vanguard Australian Shares ETF units have returned an average of 8.63% per annum (including dividends).

The post Here’s how I’d dip my toe in the Aussie stock market with $500 appeared first on The Motley Fool Australia.

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More reading

• The cheapest index fund on the ASX revealed
• Is the Vanguard Australian Shares Index ETF (VAS) still a dirt-cheap buy in April?
• Sunk $10,000 in the Vanguard Australian Shares ETF 3 years ago? Here’s how much passive income you’ve earned
• 3 reasons to start buying ASX shares this week
• How I’m building more passive income to retire early

Motley Fool contributor Sebastian Bowen has positions in Telstra Group and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman. The Motley Fool Australia has positions in and has recommended Coles Group, Harvey Norman, and Telstra Group. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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