Starting out in the Australian stock market can be a lot to take in, and every new investor feels a bit lost at first. You might be asking: "What are the best shares to buy?" Or maybe you're yet to even decide whether you'll invest in shares or another investment type. As much as we may wish otherwise, there are objective "best" shares to buy for beginners in Australia. However, by learning more about different share types, you can choose an investment that matches your goals and preferences.

This is where this article can help you. We will start by focusing on the basics to help you understand the main differences between two key investment classes: individual shares and ETFs. By the end, you'll have a clearer picture of the two options and how to choose which one to invest in. Ready to make some sense of it all?

What are shares?

The uncertainty of picking shares and watching their prices bounce around can make anyone feel uneasy, especially when you're starting out. One way to overcome this is to learn about the fundamentals of shares.

So, when you hear someone mention they want to "buy a share," they mean they're buying a tiny piece of a company. Think of it like owning a single puzzle piece of a big puzzle that makes up a company.

Now, where do you go if you want to buy these shares? In Australia, the main investment marketplace (a.k.a stock market ) is the ASX - that stands for Australian Securities Exchange. If you've ever been on the ASX website or used a stock trading app, you might've seen the long list of companies you can invest in.

Companies listed on the ASX are grouped into different categories, known as market sectors. For example, there are sectors for Australian banks, healthcare, construction or technology. And when these companies make a profit, they might give a part of it back to the shareholders. This payment is called a dividend.

If you're thinking of starting to invest in shares, you might want some help. That's where brokers come in. Platforms like Pearler or other investment apps can give you a route through which to buy shares.

What are ETFs?

Now, onto exchange-traded funds (also known as EFTs). Think of them as a bundle of different investments packed into basket that you can buy or sell. Instead of choosing one company to invest in, an ETF lets you invest in many at once.

Why do ETFs seem to be a big deal, especially for long-term investors? They're a simple way for investors to start their investing journey with less guesswork and risk. Instead of wondering, "Which company should I buy shares in?" you can grab an ETF and get a mix of many.

If you're ever on the ASX website, in addition to direct shares, you'll also see list of all the available ETFs. And another neat thing? Many ETFs give out dividends, too.

The good news is you don't need a lot of money to start. Micro-investing allows you to start small and grow from there.

Investing in individual shares

Here's the deal: if a company prospers, its share price can shoot up, and you can earn a dividend. But there's also a chance for losses. Like any investment, there are both pros and cons of investing in individual shares. Read up on them below.

Advantages	Disadvantages
1. Picking your favourites. With direct shares, you can choose individual companies you believe in. Maybe you love their products or you're impressed by their leadership. It's your call.	1. Unpredictable moves. Share prices can be unpredictable. One day they might be up, and the next day, they might tumble down. This unpredictability can be nerve-wracking for some.
2. The thrill of the big win. If you've got a sharp eye for promising companies and they do super well, you're in for potentially massive gains. Your returns can be much higher if your stock picks turn out to be stars.	2. All your eggs in one basket : When you invest in a single company's shares, you're relying a lot on that one company. If something goes wrong with it, your investment can take a hit.
3. Feeling like a boss. Investing in direct shares gives you a sense of control. You directly own parts of the company. Sometimes, you might even get a say in company decisions. It can feel empowering!	3. Time-consuming research. To make smart choices, you need to know a lot about the company you're investing in. This means spending time on research, checking out the ASX website, reading news, and more.
4. Direct cash. When companies make profits, they might send some of it your way as dividends. You get some of those earnings now, rather than having to wait until you sell the shares.	4. No guarantee of dividend. Companies don't always give out dividends. And even if they do, there's no promise it'll happen every time they make a profit.
	5. Fees and costs. Each time you buy or sell shares, there's often a fee involved. This is called brokerage. And if you're using a share trading app or broker, these costs can add up.

Investing in individual shares has its bright spots. But, just like anything else, there are two sides to every coin. It's always good to know both sides before jumping in.

Investing in ETFs

If you're looking to invest without focusing on a single company, ETFs help you do that. By investing in an ETF, you're spreading your money across different asset classes, companies, sectors or geographic regions. But ETFs also have their pros and cons. Let's explore what those are.

Advantages	Disadvantages
1. Diversification is the name of the game. When you invest in an ETF, you're not just putting your money into a single company. You're spreading it out over several companies or even sectors. This means even if a couple of them have a rough day, the others can help steady the ship.	1. Fees. Even though they're generally low, ETFs do have fees. Over time, these can add up, especially if you're not actively watching them.
2. Looking for steady growth? ETFs usually aim to mirror the general market or an applicable index like the Dow Jones. So, you're generally riding the same waves as the broader stock market. This can potentially lead to more consistent returns.	2. Potential for over-diversification. Sure, spreading out your investment sounds good, but sometimes having money in too many places means you might miss out on bigger gains from specific stocks.
3. Keep it chill. If you're someone who likes to "set it and forget it," ETFs make this possible. They offer a hands-off, passive approach to investing. No need to keep tabs on individual companies daily.	3. Liquidity issues. Some ETFs aren't traded a lot. This means they are harder to sell when you want, especially if they're less known or in a specific sector.
4. Saving on those pennies. Some ETFs come with lower fees than other investment options. Less in fees means more of your money stays with you.	4. Dividend challenges. If you're looking for regular income, some ETFs might not give out dividends as often as you'd like.
5. Perfect for beginners. If you're just starting, managing individual shares can feel overwhelming. But ETFs are simpler and easier to acquire and manage compared to other investment types.

In essence, ETFs can be a great tool in your investment toolkit. They offer a blend of diversification, potential returns, and simplicity, all wrapped up in a package suitable for beginner investors. As you build your investment portfolio, it's good to know both the pros and cons to decide what's best for you.

Why invest in individual shares?

Investing can be like picking out the perfect outfit. It should match the occasion and make you feel confident. So, when thinking about individual stocks, let's look into when it makes sense to invest in them:

• Investing style. If you enjoy researching, keeping tabs on the market news, and want to handpick where your money goes, individual stocks could be your thing. Some folks like using share investing apps or brokers to help with this. So, it pays to choose the right broker for you.
• Risk tolerance. Investing in individual stocks can be a bit bumpy. If you're cool with some ups and downs and have the patience to ride it out, it might be a fit for you.
• Goals . Think about what you're investing for. If you're looking to invest for a long time, and you're okay waiting it out even if things get shaky, individual stocks can be a fit.
• Personal circumstances. Let's say you have some extra cash and you don't need it immediately. This could be a chance to invest in individual stocks. If money's tight, you might look at other options.
• Investing experience. Being a beginner is totally okay! If you choose individual stocks, take it slow. Use apps, read up on the ASX website, and maybe even consider fractional shares trading to start small.

Investing in individual stocks can be a good move if it lines up with who you are and what you want. Always remember, investing is about growing your money over time, not overnight. Take your time in figuring out if individual stocks fit into your overall goals and preferences.

An example of investing in shares: Alex's story

Alex is a young professional living in Australia. He's always been curious about the investing world. After saving up some cash, he decided he wanted to dive in. Here's a look into Alex's decision to invest in a promising Australian tech company.

1. The research phase. Alex heard about a tech company making waves in Australia. It was all over the news and it got him curious.
2. Why this company? This Australian tech company had a product Alex believed in. Plus, they had plans to give out dividends, which means extra cash for shareholders.
3. Getting some help. Being new to all this, Alex decided to check out Pearler's First Time Investor Guide to understand the basics of investing. Reading these resources help him understand the details, like brokerage fees and how investing works.
4. Using tech to buy tech. Alex used an investing app on his phone. It was beginner-friendly, and within a few minutes, he was the proud owner of individual shares in the tech company.
5. Eyes on the prize. Alex wasn't looking to get rich quick. He saw this as a long-term investment. He believed in the company and wanted to be a part of its journey.

Alex’s story is a simple example of why someone might choose individual shares over other investment types like ETFs. He wanted to invest in something he believed in and was excited about. It made him feel more connected to his money and where it was going.

Why invest in ETFs?

Investing doesn't always mean putting all your money into a single company. By investing in an ETF, you can spread your money across many different shares at once. But, when does it make sense to invest in ETFs? Let's see.

• Investing style. If you like keeping things straightforward and want a hands-off approach, ETFs could be for you.
• Risk tolerance. Nervous about your money? ETFs spread the risk because you're invested in multiple companies. If one doesn't perform well, others might balance it out.
• Goals: Want to grow your money over time without too many ups and downs? ETFs can be a steady choice over the long term.
• Personal circumstances. Not everyone has endless hours to research individual stocks. If you are short on time, ETFs could be a suitable investment option.
• Investing experience. New to the game? No worries! ETFs are beginner-friendly. Even if you've been around the investing block, they're still a solid choice to diversify your investments.

ETFs are a way to invest without putting all your eggs in one basket. Whether you're a beginner or looking for a simpler way to build your wealth, ETFs can be a great addition to your investment portfolio. Remember, investing is all about what feels right for you and your goals.

An example of investing in ETFs: Jamie's story

Jamie is a beginner when it comes to the world of investing. While she has a good handle on personal finance, exploring the ASX to pick individual stocks seemed overwhelming. That's why she decided to invest in ETFs.

1. First steps on the ASX. Jamie started browsing the ASX website. There, she stumbled upon ETFs – collections of stocks bundled together in packages.
2. Building her portfolio. Jamie decided to start with Australian ETFs to support businesses in Australia. Over time, she sprinkled in some international shares through an international investing platform to give her portfolio a global touch.
3. Safety first. Using a broker, Jamie made sure her investments were diversified across different sectors. This way, if one sector wasn't doing well, others might offset the poor performance.
4. Watching her money grow. Over the years, Jamie noticed that her ETF investments, along with their dividends, grew. She kept an eye on them using her investing app and, occasionally, the ASX website.

ETFs allowed Jamie to invest in the stock market without the stress of picking individual stocks.

So, which are the best shares to buy for beginners in Australia: individual shares or ETFs?

As you may have pieced together by now, there is no "best" choice – only the right choice for you. We've seen how both individual shares and ETFs have their own sets of perks and challenges. When deciding whether to invest in stock directly on the ASX or spread investments using ETFs, remember that it's all about what works for you. Think about your goals, comfort level, and personal situation.

Remember that every investment journey is unique. So, keep learning, stay curious, and make choices that align with your own path. Investing is a big step, but with the right tools and knowledge, it can be a rewarding adventure.

Happy investing!