If I were starting my investment journey again with my first $500 to invest into ASX shares, I’d pick Future Generation Investment Company Ltd (ASX: FGX).
The problem with investing just $500 is that brokerage can take up a material amount of your starting money. So I’d want to go for an ASX share that I could stay invested in for the long-term.
If you were to begin with a single ASX share like Commonwealth Bank of Australia (ASX: CBA) then your entire investment portfolio would be allocated to just one business. That’s not very good diversification. I’d also want to pick something that can do well if there’s another coronavirus market sell off.
What if you could pick an investment that could give you good diversification right from the start? I think Future Generation is a good answer.
Why is Future Generation a good ASX share?
It’s a special listed investment company (LIC). The job of a LIC is to invest in other shares on your behalf. Most LICs will charge a management fee (and perhaps a performance fee).
But Future Generation doesn’t charge a management fee. It donates 1% of its net assets each year to youth charities.
What does Future Generation actually invest in? Well, it doesn’t invest in normal ASX shares. It invests in the funds of around 20 fund managers who also work for free. They don’t charge management fees or performance fees.
Each fund is a separate portfolio. So Future Generation’s underlying diversification is very strong. The investments that Future Generation’s managers usually go for are those smaller growth shares, so in normal times it may be able to offer better growth than the ASX index.
One of the fun things with LICs is that sometimes you can buy them for cheaper than their asset value. You can buy the ASX share’s $1 of assets for less than $1. That seems like good value to me. Future Generation has been trading at an attractive discount to its net tangible assets (NTA) in recent times.
As a bonus, Future Generation currently has a grossed-up dividend yield of 7.3%. I think Future Generation is a good ASX share to start with $500.
If you want some more ideas about where to invest your first $500 then I’d definitely consider these top ASX shares…
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More reading
- Got $50,000 to invest for income? Pick these 5 ASX dividend shares
- How to make $1,000 a month in dividends
- How to build good wealth with small investments
- Why high yield dividend shares can be detrimental to your wealth
- 2 ASX shares to build a diversified dividend portfolio
Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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