What You Need To Know About Investing in ASX Shares

The ASX Share market can be a great place to increase your wealth – provided you make the right moves from the start. By this I mean that there are a few fatal mistakes that can cost people their nest eggs, and see them leaving the market for good.

What do I mean? Let me give you an example: Let’s say you started putting $150 a month into ASX Shares in 1980. That’s around $5 a day. It earns an average of 15% per annum over the years including dividends. If you re-invested all your returns, today it would be worth over one million dollars – $1,038,490 to be exact.

But not everyone makes it that far. In fact, a great deal of people investing in ASX shares lose a portion of their money, get scared out of the market and never invest again. And the sad part is they never discover that million dollars we just spoke about because after all, you’ve got to be in it to win it.

So how can we make sure we don’t make the same mistake trading ASX shares? Your Trading Plan is the answer, and although it can be simple, it is the most powerful tool you will use in the market. If you haven’t got one, you shouldn’t be trading. But where do we start?

Well, there are many different ways to invest – in fact as many people as there are investing. But there are a few solid ground rules that will definitely help you out. Therefore, your trading plan should have the following:

1: Your Rules for Buying and Selling – these are the rules you have tested that determine when you buy and when you sell a share. Whether it is buying for fundamental reasons, like company earnings or book price, or whether it is for technical reasons like crossing a trend line or Dow theory it doesn’t matter: so long as it suits you.

2: Your Money Management Rules – this is where you decide how much of your portfolio you will invest in one share. And also how many positions you will spread your portfolio across. As a guide, between 6 and 12 positions is usually optimum. Any less than 6 and you risk not being diversified enough. Any more than 12 and you risk being unable to out-perform the market (the best portfolios are often slightly focused).

Having these in place will set you on your way to a solid start in ASX Shares.

Get more from your ASX Shares with a free course on trading and investing. There’s also free research on Australian Stocks – all at www.asxmarketwatch.com .