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Getting into ASX Shares but don’t know where to start or which are the best ASX Shares to buy?

Richard Hemming

Everyone hears lots of stories of a friend who made a mint and who has “got into shares” and seems to be doing better than you are.

And maybe you would quite like to start share investing with a bit of money you have saved but you don’t know where to start.

An image of a man looking at a computer
People buy ASX shares to grow their wealth and historically the ASX share market grows 10% a year.

It’s really easy now because you can set up a share trading account with an online broker and share trade yourself. The online brokers all make it pretty easy to actually make the physical trade. The question that everyone really needs help with is which are the best ASX shares do I buy? And how do I know it’s the right time to buy shares?

There are over 2,000 shares listed on the ASX so how do you know which shares to buy and which are the best shares to buy?

What you need in your tool kit is ASX SHARE research and proper share research that gives you clear buy/sell and hold recommendations written by independent analysts. And with share research, I don’t mean free PR. If you are reading about a company for free you can bet that it’s PR, it is not not independent research, it generates a flicker of interest, you rush in and buy and then never hear from them again. Buyer beware!

Some of the papers used to be known for their fantastic coverage of companies giving readers proper updates on both blue chip and small caps covering their results, performance, and market moves but those company pages have shrunk and they really now just focus on the big end of town. There became so little independent research on small caps that Richard Hemming started Under the Radar because there was a real gap in the ASX small cap share investing opportunities for Australians.

Choosing which are the best asx shares to buy

Under the Radar makes it really easy to choose which shares to buy giving you clear buy, sell and hold recommendations and we keep updating subscribers on any new information or change in recommendation. You are not on your own. We give you the tools to invest.

Isn’t it scary investing in ASX shares and how don’t I lose money investing in shares?

Yes, it takes courage to invest in shares, like it takes courage to put your hand up at an auction! It’s just at an auction you are dealing with much greater sums of money and your asset is much less liquid – that is, you are pretty well stuck with it and it’s a big deal to sell it and to get your money back. You can also invest much smaller amounts into the share market. So the lesson is start small.

But I haven’t answered the question, yes it takes courage to invest in ASX shares. And yes, the share market goes up and it goes down. But on average it goes up 10% a year. The average return of the S&P/ASX 200 Index is close to 10% a year over the long-term. Our share research analysts have all been researching and investing in companies for over 25 years (we don’t hire green horns) but we don’t always get it right. No one does. But in a diversified portfolio our results are very strong. We have delivered an average return of 41% on all our small cap stocks since 2011. Read more about our share performance here and through diversification you can really help protect your share portfolio.

Blue Chip ASX shares are the basis of your share portfolio

We cover 40 Blue Chip ASX shares that we have selected as they are strong performers that pay dividends. We give share price targets and show you which are the shares to buy right now. We help you know which bank shares you should buy now, is it CBA or ANZ? We show you which mining shares you should buy and make it easy for you to choose which blue chip ASX shares you should buy.

The hunt for Growth: Small cap growth stocks and how many shares should you own?

Now you need to own some stocks for real growth. Investors use Small Caps to get growth. I’m talking about ASX listed companies with market caps of less than $500m. It’s much easier for a Small Cap to double or triple in size than for a blue chip to achieve consistent double-digit growth. Over 50% of our small cap shares also pay dividends to help boost your income.

How many small cap growth stocks should you own?

The benefits of diversification ratchet up when you go from one to 10 ASX Small Cap growth stocks. After this the advantages diminish. You want to own between seven to 10 ASX Small Cap stocks on your own.

The advantages of owning Small Caps are clear. The “core” or “market” (in this case the S&P/ASX 200 Index) does not include these companies, so their returns are less correlated to the index. If the market down, some of these Small Caps could well go up, which lowers your overall stock market risk.

Also, because they are small, they have much more operating leverage, which is a big reason they can achieve above market growth – what really mean is above 10% growth.

In terms of exposure to Small Caps in your ASX share portfolio, there is no one right answer for everyone because every ASX Share Investor has a different tolerance for risk. If you are risk averse you would put a greater portion of your funds in your core Blue Chip ASX share portfolio, for example. If you are able to embrace more risk, you would put more money into growth small cap shares.

How to choose the best small cap shares to buy

Under the Radar Report runs two portfolios – a Blue Chip portfolio, which will have between 25 and 35 stocks; and a Small Cap portfolio which currently has 18 stocks in it, plus an ETF replicating the price of gold (GOLD).

These concentrated share portfolios are designed to add what the industry terms “alpha” which means performance above that experienced by the market. Both are and have been performing well above the market since their inception.

We also have a “BEST SHARES TO BUY SECTION” which gives you the Small Cap shares to buy that we like now that our analysts at Under the Radar Report agree offer value for money and the best risk/reward return. This best shares to buy table is updated each week. Subscribers just go to the dashboard of the ASX stock report to choose which shares to buy.

But it’s a diversified portfolio of ASX shares that really can help protect you

If you buy a number of shares, say 7-10 shares across different industries, you can really reduce your share specific risk. And if one bombs out, the other shares that you own and have carefully selected will be in different industries. With a diversified share portfolio you are protecting yourself against a stock specific risk.

Patience in ASX share investing

Often you need patience in share investing. One of our long-term best performing ASX small cap shares that has returned 190% to our subscribers is Macquarie Corporate Telecommunications (MCT). This stock we first covered at $7 and $8. It then dropped to between $5 and $6 for about two years. That was a long two years! We had a lot of subscribers questioning our rational but we remained firm on our ‘hold’ recommendation and didn’t say cut your losses and sell. We still believed in the small cap fundamentals of the company, and understood that the management was undergoing a big (read massive) company restructure and focus. It finally started to turn around and now is valued at $21.70! It also pays dividend and has a dividend yield of 4.8%. So yes, it did go down, but patience has absolutely paid off.

Some ASX Shares pay Dividends for income

You can also invest, like you invest in a house for capital growth and for rental income. Lots of companies pay dividends providing regular income.

Dividends can protect your ASX share portfolio

When a company is paying dividends, it shows that the company is performing well and is generating profits to return to shareholders. So those companies will tend to hold their share price well.

So how do I start investing in ASX shares?

We know it takes courage, but Under the Radar shows you how to build a portfolio so that you get the benefits of investing in the share market. And yes, there are benefits! That’s why so many people do it.

Under the Radar Report shows you how to build a portfolio so that you get the benefits of investing in high growth Small Caps plus the long-term benefit of investing in the share market. Our ASX stock report gives you the investment tools that the big end of town use and we help you choose which ASX shares to buy.

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About the Author

Richard Hemming

Richard Hemming (r.hemming@undertheradarreport.com.au) is an independent analyst who edits www.undertheradarreport.com.au, which provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (AFSL: 409518). The author does not own shares in any of the stocks mentioned.

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