I’m not an expert investor or an analyst and working at Under the Radar Report, like our subscribers, I have access to quality independent research and I have my brain. I’m sick of not saving and frittering money and I want to plan for my future.
My Plan: I’m going to buy an ASX share (ok a parcel of ASX shares, not just one) a month using money that I’ve saved in that month. And slowly over time I’m going to build up my ASX share portfolio.
I have always put buying shares off, saying I’m too busy, how do I know if the market is about to fall off a cliff (we all know that it’s strange times in the world economy and global politics), I’ve made up excuses and I literally have nothing to show for it.
But yesterday I BOUGHT MY FIRST ASX SHARE!
What did I do to start buying shares?
Step 1: Set up my online trading account
On Monday I set up an online trading account. There are lots out there. Search around for 10 mins to work out which is best for you or you can go to the one your bank has (nabtrade, ANZ share investing, Commsec, Bell Direct…… ). But a basic trade up to $10,000 ranges from about $15-20.
And I transferred some money into the share trading account so I could buy ASX shares!
Step 2: Which share should I buy?
Well this is obviously the killer question isn’t it. There are over 2,000 shares listed on the ASX so which company deserves my precious money?
People spend thousands of hours working out which ASX share to buy, they have technical analysis screens that are used to evaluate investments and identify trading opportunities in price trends and patterns and then there is fundamental analysis which involves researching the company and its financials in huge amounts of detail.
Buying an ASX Blue Chip share
I’m not skilled nor trained in this. I wanted to buy a Blue Chip share first. Why a blue chip when we are known for small caps? Because Blue Chips are more advanced in their business cycle being on the whole more established. For my first share I want more security and less risk. Small Caps are growth shares for outperforming the market, at this point, I just want to get into the share market!
Blue Chip Value Report helped me choose which ASX share to buy
We have a fortnightly report called Blue Chip Value. I logged in online, went to Blue Chip Value Research, and a list of the 40 ASX blue chip shares we cover, I sorted the table by rating: Buy/Sell/Hold. I looked at all the shares we have a buy recommendation on, we have 14 Blue Chip Value ASX shares we are currently recommending to buy. Some of them like Rio Tinto (RIO) trade at $82-$83 and with my small amount I don’t want to own 10 or 12 shares! So I wanted a lower priced share. I also want a share that pays a good dividend and we have a Target opportunity which is awesome and really helped me choose which share to buy.
(What I did realise is that I can’t export this list of ASX shares out into excel – I can sort it on the screen by column (buy/sell/hold), dividend yield, etc but it would have been much easier to decide which share to buy if it had been in excel. I’ll get that changed so you can.)
Target Opportunity in Blue Chip Shares
One of our experts, Sam Ferraro, who was previously the head of the quantitative analysis team at Goldman Sachs, has built a screen which he runs the top 200 ASX shares through. He has selected about 40 are a good strong investment for an ASX Blue Chip portfolio - he has then used about half of these stocks to build a share portfolio . (Our Blue Chip Value portfolio that he runs is outperforming the market).
The Price Target and Target Opportunity shows where Under the Radar Report believes the share price will be in 12-months! It’s not magic, it’s institutional grade research that mum and dad investors can access for $149 a year. I think that is definitely affordable and takes the stress out of choosing which share to buy. Our analysts then also review each company through fundamental analysis and comment on the share reviewing the buy/sell/hold recommendation. It’s a mix of technical and fundamental analysis.
Back to selecting which share to buy.
I chose a stock with a big target opportunity (Under the Radar thinks it has the potential to go up 45.5% in the next 12-months) it’s forecast to pay a strong dividend yield of 7.6% and it was around $2.25. I hit buy, I had to put in what I would pay for it (remember, it’s a trading market with bids, I put it with a range of a couple of cents higher. The price limit is the maximum price you are willing to pay per share and voila - I bought Alumina (AWC). ( the order was paced into the queue and was transacted a short time later.)
I’d bought a share for better or worse. Let’s hope for better. (Remember Under the Radar Report has 14 Blue Chip Shares that we are currently recommending as a buy and maybe there is a share that is better for you and your portfolio).
Buying an ASX share was actually pretty easy. Two days later I see a lovely green colour on my online trading account and I am the proud share owner of a business.
Managing the emotions of the share market
My plan is long-term and I’m not going to be watching every second of the day and freaking out if it goes down. I know this is an established business and that the market does jiggle and wriggle but overall, it goes up on average over time. Check out the graph below. If you look at the last year the ASX 200 has been going up. At the end of last year the market was full of fear, everyone was selling their shares, but actually it was an awesome time to buy shares! And if you look at the GFC where people lost a lot of money in their shares, the share market has powered on back up. I’m going to try not to freak out when the wriggles and jiggles happen. With interest rates so low, any money in the bank is losing its value and not even keeping up with inflation.
What is the smallest amount I can use to buy a share? ie what is the minimum I can invest in the share market?
Remember I’m not doing this all at once. I’m just going to buy one share a month. (except this month when I’m going to buy two – a blue chip and a small cap). Well, I put in $2,500 because that is what I had. That may seem like peanuts for some people and a mountain for others. If you had $500, start with $500. And then next month or at a future point in time – whatever is right for you, you might buy another $500 etc in the same ASX share so you can build up a holding in a share over time. You just have to pay the trading fee. Hunt around for the best rate when you are setting up your share trading account.
Diversification is important
Because I know that diversification is really important (not putting all your eggs in one basket) I’m going to buy a number of different ASX shares – I’m personally aiming for 10-15 shares. Once I have a number of ASX shares in my portfolio I’m going to then look at building up that holding over time. Please remember this is just my strategy to start investing. I am not a professional or expert.
But I’m pretty excited that I’ve started investing and I’ve bought my first ASX share.