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Investing S&P/ASX 200 Index (ASX: XJO) shares have never been easier.
At least as far as the actual buying and selling process goes.
It wasn’t that long ago that anyone wanting to buy ASX 200 shares had to make a phone call or visit their broker.
While this is still an option – and some brokers may even offer investment advice for a fee – many investors these days prefer to set up an online account and do their own buying and selling.
It is definitely my choice.
With that said, here are three things I knew before I started investing in ASX 200 shares.
Market timing, not market timing
Market timing, not market timing.
It’s a bit of a cliché for buy and hold investors. But clichés usually become clichés because they are based on broad truths.
As an economist with a good grasp of macroeconomic trends, it is very tempting to try to buy ASX 200 shares when I believe they are at lows. And then maybe sell them when I’m in high confidence.
Although I can get around it now and again, it’s basically impossible to successfully time the market with any sort of consistency.
If not, many other billionaires would be sitting on the sidelines.
Instead of trying to predict what an ASX 200 share is going to trade for next month, I wish I knew how to take the long view and invest in well-managed companies with operating standards in a growing market with arm’s-length competition.
Five years down the road, history shows that these companies have a good chance of being worth significantly more than they are today.
And trying to time ideal entries is often completely lost.
A diversified ASX 200 share portfolio
As with market timing, it can be tempting to try to pick a few winners from the pack.
But investing all your money in just a few ASX 200 shares carries a lot more risk than spreading your investments across a wider basket of stocks.
And those stocks should ideally work across different sectors. That way if a particular sector comes under pressure – think the banking sector last month – all your holdings won’t lose value.
One thing that would have been useful to know back in the day was the potential appeal of exchange-traded funds (ETFs).
There are a number of ETFs that closely track the performance of a range of ASX 200 shares. Some are sector-specific. Others are intended to track broader benchmarks. All this provides investors with instant diversification with a single share purchase.
read read read…
Which brings us to the third thing I knew before I started investing in ASX 200 shares.
Read, read, read some more.
If you’re like me, you probably worked hard for the money you planned to invest.
So make sure you do your research on the companies you plan to buy from before placing your order.
Half-yearly and annual results must be considered reading. You can find them on the company website, the ASX website and more The Motley Fool Websites, among other sources.
Now, these reports may seem terrifying at first glance. But once you get how they’re put together, you can usually get the ASX 200 share information you’re after fairly quickly.
Check out how the company is performing this year compared to previous years. And investigate the growth outlook through both the company’s own guidelines and any professional broker coverage you have access to.
There are also plenty of handy investment newsletters you can subscribe to. Some are free, others will charge you a membership fee.
No matter how you decide to approach your research, don’t skip reading.