Ah, a brand new year has dawned. Sure, I'll have broken my New Year's resolutions by the end of January, and I'll still be mistakenly writing "2015" until sometime in March, but there's something deeply refreshing about a new year.
Maybe it's being able to figuratively leave the past behind with a flick of the calendar. Or the promise of a blank slate ahead of us. Or simply that maybe, finally, this year will be the year we take the Bledisloe Cup back from the All Blacks.
Whatever the appeal, many of you will be taking the opportunity to set some financial goals for 2016. And, I hope, for those of you who haven't yet taken the plunge, maybe 2016 will be the year you start (or restart) your investing journey.
Here's how to get going
Much has been written about how to kick off your new investing habit. Indeed, I did just that not too long ago. If you haven't got set up yet, go and read that article first. I'll wait.
Back now? Good – let's continue.
Once you've got the basics set up, it's time to start building your portfolio. And remember, you're an investor, not a trader, so you don't care what happens in the short term. We're talking five years or more – hopefully a lot more – before you need the money.
Let's say you're starting with $10,000 (or you're going to build up to $10,000 in time). Here's how to create an instantly diversified portfolio to get you on the right track in five easy trades.
1. 20 per cent in a diversified Australian exchange-traded fund (ETF)
You don't want to get into picking individual stocks straightaway, but you want to get broad exposure to the sum total of the wealth-building ingenuity and hard work represented by the companies on the Australian Securities Exchange. So we'll put 20 per cent of our money into a Vanguard Australian Shares Index (ASX: VAS) exchange-traded fund (ETF) that delivers just that. Be aware, though, that half of that investment will be represented by the big banks, big miners, big retailers and big telcos – so if those companies struggle, the ETF will too. If I had more faith in the banks and miners, it'd be a higher percentage than 20 per cent.
2. 30 per cent in a diversified international ETF
Most of the world's wealth, most of its best companies and most of its best investment opportunities lie outside Australia. Another Vanguard ETF, this time the Vanguard MSCI Index International Shares ETF (ASX: VGS) meets that need – and it's traded on the ASX. And if, as expected, the Australian dollar falls against the US dollar, we'll have not only some of the best businesses in the world in our portfolio, but a currency kicker as well.
Two down, three to go
That's half of our money investing in a very broad range of businesses right around the world. Now, let's turn our attention to three individual shares to make up our five-trade portfolio. And because you're just getting started, these are going to be companies you know, and likely interact with at least fortnightly, if not more.
Why? Because the best way to learn about investing is to think of yourself as a part-owner of a business – and what better than a business whose services you use.
3. 20 per cent in Wesfarmers shares
Shop at Coles? Kmart? Target? Bunnings? Officeworks? Then you're shopping at a Wesfarmers (ASX: WES) -owned store. It's a very well-run conglomerate, shares are attractively priced, and you'll feel good every time you shop there, knowing you own a tiny piece of each store.
4. 20 per cent in Telstra shares
More than half the population uses Telstra's (ASX: TLS) mobile network. Almost all of us use its landlines and a sizeable chunk have a Bigpond internet connection. When you walk down the street, half of the teenagers you see with a phone glued to their ears will be putting money straight in your pocket. And with Telstra's famous (not to mention sizeable and tax-effective) payout, you'll start to appreciate the power of dividends in a very tangible way. Just make sure those dividends don't end up being spent!
5. 10 per cent in something you choose yourself
"What do you mean I should choose something myself?" Well, there's nothing more powerful to engage your brain than having to make your own investment decision. It's a small enough proportion of your portfolio that it won't matter if you completely screw up, but it'll start to make you think about how to invest. Here are the ground rules: It must be a company whose products or services you use. It must be a company you think is growing and can continue to grow for a while yet. And it must be a company whose products or services you're passionate about. You're going to own a slither of the company – so make it one you're excited to own.
Of course, that isn't the end of your investing journey, but merely the beginning. It's got you off to a solid start, you'll almost instantly start thinking differently about the companies you own, and you'll look at other companies with a different, more curious eye – as potential investments.
Congratulations – you're on your way to becoming a seasoned investor. Just remember to keep thinking long term, and don't sweat volatility. Keep saving and investing regularly, then hang on for the ride. It's worth it.
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Scott Phillips is a Motley Fool investment adviser. He owns shares in Telstra You can follow Scott on Twitter @TMFScottP. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).