I'm 17 and about to graduate from school. I hope to study maths at university. I'm interested in investment and want to start earning compound investment returns as soon as I can. I am also interested in what you've been saying about exchange-traded funds and how they're a good place to start if you have very little money. I work part-time in a service station and will be able to up my hours in the holidays. So far I've saved $1000 for schoolies and another $500 to start building my financial future. Depending on where I get accepted, I should be able to stay at home until I graduate. So how do I buy ETFs and start a portfolio?
Declan, I am loving your work ethic, time management skills and future focus. They are three things that augur well for real-world success.
And as I always say when I deliver my Smart Money Smart sessions in high schools: stay home and stash cash for the biggest financial opportunity you'll ever have.
Now I'm assuming your savings are in a high-interest bank account. Be aware you may be automatically switched to the adult account when you turn 18, which might pay less.
Your age is an issue with investing too - you need to be 18 to open an online broking account in your own name.
But, given you are so close, that gives you a lovely window to build funds to invest. While you can trade with as little as $500, $1000 is a prudent minimum amount because mozo.com.au says you'll pay as little as $9.90 per trade, which pushes the percentage cost to below 1 per cent.
That's with amscot, and several other online outfits charge similarly.
But Commonwealth Bank's broking service CommSec, which offers trading tutorials, market research and portfolio analysis tools, is now only $10 for a $1000 trade, at which point the cost jumps to $19.95 (you must settle your trades with a Commonwealth Direct Investment Account).
Either are dirt cheap compared with the hundreds of dollars old-school brokers charged ??? which has opened trading up to anyone keen like you.
Exchange traded funds are popular not just because they offer diversification for smaller investment amounts, but because you buy and sell them as easily as any share in an individual company. Big providers in Australia include BetaShares, iShares, State Street Global Advisers and Vanguard ... and the specific funds you go with will depend on which markets and industries you like.
Just be sure to first take the interactive Investing Challenge on ASIC's moneysmart.com.au, which I am delighted to present, which quizzes and corrects your investment knowledge. Good luck!
Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. You can write to her for help solving your money problem, or with a consumer question, at firstname.lastname@example.org.