How I started investing in ETFs

My heart is beating with excitement and fear as I push the buy button.

Questioning myself as to whether I've made the right choices. It's the start of February, there's been a dip in the market, and after months of reading and learning I was finally taking the plunge and buying my first shares.

If you had told me only a few years ago that I would soon be investing in shares, rather than real estate, I might not have believed you.

Investing in the stockmarket had always seemed so daunting, seemingly jumping up and down from day to day let alone the thought of trying to weed through all the different industry sectors to pick the right company to invest in. Luckily I discovered ETFs and LICs (Listed Investment Companies) which buy a slice of the market rather than needing to pick a particular company.

After learning about LICs when reading The Barefoot Investor, the sharemarket as a whole started to make sense.

More reading, through magazines, blogs and forums, and the hands off benefits of shares and specifically ETFs really became clear. No tenants to deal with or weekends of house hunting for the perfect property, instead I could build a portfolio which would hopefully one day pay me a passive income.

I chose both Australian and international ETFs so that with a push of that button I would be buying a small slither of the ASX 300 as well as a slice of the international, mostly American, market. I didn't have to decide if I liked the look of a company's board members or whether their debt to equity ratio could still create growth, instead for a small fee (less than 0.2%) the ETF would automatically diversify my portfolio and invest across the top 300 Aussie companies for me.

Although I also decided to invest internationally (after all Australia only makes up about 3% of the world's market) I made sure that the ETF I invested in was domiciled in Australia as the complication of American tax forms just did not seem appealing despite slightly lower management fees.

The first piece of the puzzle - and the one which took me quite some time to decide on - was working out how to actually buy the ETFs. There are so many online stockbroking options but two factors helped me narrow down my choices, plus lots of reading on forums to get others opinion.

The first was a low brokerage fee so that my hard earnt money was buying as many shares as possible, and secondly, I wanted to make sure that the broker was CHESS sponsored so that shares were listed in my name.

A few months on, as the end of the financial year closes, my little portfolio is up (a little over 5% in five months) and I'm awaiting my second dividend payment.

I'm also gearing up to tackle tax time with the hope that the many resources available from the ATO will help me decipher franking credits and dividend statements. At least for this first year the measly $50 of dividends I've earnt shouldn't have too much of an impact.

All in all I've enjoyed watching how the market ebbs and flows, thankfully so far tracking slowly up.

Now that I've started on this investing journey I'm holding out for the long haul, slowly building a nest egg by harnessing the power of compounding and looking forward to living off dividends someday soon.

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