Paycheque to Portfolio: Beginner Investing Tips

Before you start scrolling through trading apps or dreaming of your future beach house, take stock of your current finances. For beginner investing, The Australian Securities and Investments Commission’s (ASIC) MoneySmart service recommends listing all your assets (including your super, any savings and your home) and debts to see how much you really have to invest. Use their free budget planner to track income and spending and identify cash you can divert towards investing. This step isn’t as glamorous as buying your first stock, but understanding your cash flow early gives you the discipline to invest consistently.

Next, decide what you’re investing for. Separate goals into short-, medium- and long-term buckets and then choose investments that fit each time frame. A short-term goal like a holiday might be better served by a high-interest savings account, whereas a long-term goal such as retirement requires growth assets like shares or property. Assess your risk tolerance by asking whether a 20% drop in your investment would keep you awake at night; match your investments to your comfort level.

Shares: Owning a Piece of a Company

When it comes to beginner investing, it’s important to understand the differences in investment types. Buying shares makes you a part owner of a company and entitles you to dividends when profits are distributed. You can buy shares directly through an online broker or indirectly through managed funds where many investors pool money. Online brokers like CommSec and SelfWealth let you place trades yourself; full-service brokers provide advice but charge higher percentage-based fees.

According to StarInvestment’s comparison, CommSec charges $19.95 for trades up to $10,000 and 0.11% on larger trades, but offers advanced research tools and access to international markets. SelfWealth is a low-cost alternative with a flat $9.50 brokerage fee per trade regardless of size, making it popular among cost-conscious investors.

For those who don’t want to commit to full lots of shares or have limited funds, CommSec Pocket is a micro-investing product from CommSec that allows investments from as little as $50 into themed exchange-traded funds (ETFs) for a $2 brokerage fee. Unlike the main platform, you don’t choose individual companies; instead you pick from 10 pre-built ETFs (e.g. Australian companies, tech stocks, emerging markets) and can set up automatic fortnightly or monthly contributions. This “set and forget” approach is a useful entry point for busy workers who want to build investing habits without large sums.

Exchange-Traded Funds: Instant Diversification

ETFs are managed funds that trade like shares and can give you broad exposure to a basket of companies or assets. MoneySmart lists diversification, transparency and low cost as the main benefits. Rather than buying individual stocks, you buy a unit of an ETF and immediately own a small slice of many companies or bonds. ETFs typically publish their holdings daily and have low management expense ratios, making them an efficient way to spread risk. However, they still carry market and sector risk; if the index falls, so will the ETF, and international ETFs have currency risk.

ETFs can be bought or sold through the same broker you use for shares. You should compare an ETF’s trading price with its net asset value (NAV) or intraday NAV (iNAV) and reading the product disclosure statement (PDS) for details on fees and the index it tracks. ETFs are a simple way to get diversified exposure, and many micro-investing apps like CommSec Pocket or Raiz build their portfolios exclusively out of ETFs.

Superannuation: Your Compulsory Investment

Beginner investing could start with Superannuation, commonly called super. It is money set aside for retirement and employers must contribute 12% of your ordinary time earnings into your super fund. You can’t access this money until you reach 60 and retire or 65 regardless of employment status, so it’s a long-term investment. Super receives concessional tax treatment, which means contributions and investment earnings are taxed at a lower rate than your personal income.

You usually have a choice of super funds or your employer may nominate one. MoneySmart recommends comparing fees and performance via the Australian Taxation Office’s YourSuper tool and consolidating multiple accounts to save fees. Within your super, you can choose different investment options: growth, balanced or conservative. Growth options invest more heavily in shares for higher potential returns and higher volatility; conservative options favour cash and bonds. Review your super contributions and fees regularly and ensure your insurance cover remains appropriate. Making additional voluntary contributions early in your career can dramatically boost your retirement savings thanks to compounding.

Property: The Australian Dream with a Reality Check

Australians love property, and buying an investment unit or house can provide rental income and potential capital growth. Property investment may seem less volatile than shares, provides tax deductions for expenses and loan interest, and is a tangible asset, however, there are significant downsides: the cost to buy (stamp duty, legal fees, inspections) is high; rent may not cover mortgage and maintenance; interest rates can rise; vacancies mean you must fund the mortgage; and you can’t sell a “slice” of a house quickly if you need cash.

If you decide to invest in property, research location carefully (look for areas with strong rental demand and growth prospects), understand all entry and ongoing costs, and be realistic about cash flow. Borrowing to invest magnifies gains and losses, and interest-only loans eventually require principal repayments.

Micro-Investing and Beginner Investing Platforms

Micro-investing apps have exploded in popularity because they let users invest small amounts regularly. According to CHOICE, micro options are increasingly popular among young people; Raiz, one of the most used apps, allows you to start investing with as little as $5. Raiz pools your money with other investors to buy units in exchange-traded funds, allowing you to invest in diversified portfolios for less than the cost of buying a single ETF on the market. The app offers five risk-based portfolios and even a socially conscious portfolio. You can deposit money manually or set up round-ups, where everyday purchases are rounded up to the nearest dollar and the spare change invested. Fees start at around $3.50 per month for balances under $15,000 and 0.275% per year for larger balances.

CommSec Pocket is another micro-investing option designed by a major broker. Finder notes that it allows investments from $50 into one of 10 themed ETFs, charging a flat $2 brokerage fee. You can set up one-off or regular contributions, making it easy to build a habit. SelfWealth, while not a micro-investing app, is worth mentioning because of its ultra-low flat brokerage fee of $9.50 per trade. For investors making larger trades or trading frequently, this flat fee can dramatically cut costs compared with the percentage-based fees charged by traditional brokers. StarInvestment’s comparison even calculates that a $100,000 trade would cost $110 at CommSec but only $9.50 at SelfWealth.

Micro-investing isn’t free of drawbacks. Raiz’s small monthly fee can eat into returns on very small balances, and you have limited control over individual investments. However, these apps are an accessible way to begin investing, learn how markets work and build confidence.

Making Your First Moves

Once you understand your options for beginner investing and have a clear goal, it’s time to act. Consider the expected return, time frame, risk, liquidity, transaction costs and taxation for each investment. Start small if you’re nervous. Many investors open a low-fee online brokerage account and buy a diversified ETF or a handful of shares, then gradually build their portfolio. If a 20% market drop would keep you up at night, begin with conservative assets and increase exposure as you grow more comfortable.

Don’t overlook education. Explore ASIC’s MoneySmart website for calculators, guides and warnings about scams. The Australian Securities Exchange (ASX) offers a free education centre and an online “sharemarket game” where you can practise trading with virtual money. Many brokers also provide webinars and research.

Your Financial Future Starts Today

Building an investment portfolio while you’re in your twenties or thirties can feel daunting, especially when wages and living costs are under pressure. Yet, as the resources above show, there are accessible avenues to start growing wealth even with modest sums. Beginner investing means getting your finances in order, clarifying your goals and understanding your risk tolerance. Diversify across shares, ETFs, superannuation and perhaps property, rather than betting everything on one asset class. Low-cost platforms like SelfWealth, micro-investing apps like Raiz and CommSec Pocket, and the compulsory super system offer different pathways into investing. By educating yourself and taking gradual, consistent action, you can transform your pay packet into a diversified portfolio and set yourself up for a more secure financial future.

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it, you should consider its appropriateness for you, having regard to those factors. Before making any decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement.