Getting started
What you'll learn:
- What you should and should not do when building your portfolio
A portfolio doesn’t just happen overnight. It takes planning, and it will need time to grow and develop. In fact, if you don’t have much to invest initially, you may not even have a ‘portfolio’ at all. Some people get started in the sharemarket by buying shares in just one company. That’s fine, but you need to go about it the right way. And you should plan to diversify by buying shares in other companies over time.
Let’s assume you have a small amount of cash—enough to buy shares in just one company. How do you get started?
Well, here’s what you should NOT do. Firstly, you should NOT rush into buying. Too many people are over-eager to actually make their first purchase and end up doing insufficient research. The result is often a disappointing first investment that distorts your view about investing in general.
And secondly, you should NOT expect huge profits on your first purchase. It’s usually a mistake to buy shares in unprofitable, small or otherwise high-risk companies in the hope of striking it big. If you end up blowing your initial capital, it means you will have to start all over again. And who wants that?
Instead, take your time and learn as much as you can. And look for large, solid companies with long histories of profit growth first and foremost. Think about the type of companies you might want in your final portfolio, and begin that way. You’ll also need to decide whether you are primarily interested in growth or income, or a little bit of both. In an ‘average’ portfolio most people include some banks, a few solid industrial companies, and perhaps a major resource company. Of course, you’ll need to ensure that each company you buy is reasonably priced. There’s no point buying even a great company if it is overvalued.
Sharemarket newsletters, which do some of the research for you, can help you work some of these issues out. And newsletters are particularly valuable if they help you learn more about share investing in general.
Congratulations!
You have completed the What to Buy tutorial.
Now you are ready to start the next one: How to Buy it
Further Reading
- For a list of many of Australia’s most well-known newsletters, click here.
