ASX beginner? Here’s what I would do if I were starting with $500

Starting out in the share market can feel scary. There are hundreds of ASX shares, sharp daily price movements, and no shortage of opinions about what to buy.

If I were beginning with just $500 today, I would keep things simple. The goal at that stage would not be to maximise returns. It would be to build confidence, good habits, and a foundation I could build on over time.

Here is how I would approach it.

Step 1: Focus on learning

With $500, I think the most valuable return is experience.

I would avoid trying to pick a speculative ASX stock or time the market. Instead, I would treat that first investment as a long-term position and a learning opportunity. Watching how a share moves, how dividends are paid, and how company announcements affect a share price helps build familiarity.

The aim would be to get comfortable with the process rather than chasing quick gains.

Step 2: Look for broad exposure

If I were not comfortable stock-picking from the off, I wouldn’t worry. A good alternative would be to choose a low-cost exchange-traded fund (ETF) that tracks a broad index.

For example, something like the Vanguard Australian Shares Index ETF (ASX: VAS) provides exposure to 300 of the largest shares on the ASX in a single trade. That reduces the risk of picking the wrong individual stock early on.

With one purchase, I would gain exposure to banks, resources, healthcare, infrastructure, and more. It is a simple way to participate in the overall market while I continue learning.

Step 3: Commit to regular investing

That $500 would not be a one-off decision. I would make a plan to add to the portfolio regularly, even if the amounts were small.

As my confidence grew, I might begin adding individual ASX shares to my portfolio.

High-quality, established companies with robust business models are often better starting points than small speculative names. The focus would remain on businesses, I understand, and would be comfortable holding through market ups and downs.

Consistency matters more than starting size. Investing $200 or $500 at regular intervals builds discipline and allows compounding to begin working early.

Over time, those steady contributions can grow into a meaningful portfolio.

Step 4: Avoid overtrading

One of the easiest mistakes beginners make is trading too often.

With $500, brokerage costs can quickly eat into returns if you are constantly buying and selling. I would aim to make one considered purchase and then let it sit while I continue contributing.

Patience is a skill that becomes more valuable the longer you invest.

Foolish Takeaway

If I were starting with $500, I would not try to be clever. I would aim to be consistent.

By starting small and committing to regular investing, I would build the habits that matter most. Over time, those habits can do far more for wealth creation than any single stock tip ever could.

The post ASX beginner? Here’s what I would do if I were starting with $500 appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has positions in Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.