With over 2,000 companies listed on the ASX, it can be hard to know what to invest in. Especially since most investors have specific needs. So which ASX shares should parents looking to invest early on their children’s behalf buy today?
Unless you watch the share market and have been investing for a while, you are probably looking for a ‘set and forget’ investment. In other words, you want to buy shares in a company that doesn’t require you to constantly keep up to date with its reports. You want something that can be a consistent grower but is on the safer side of the risk profile.
For these reasons, I would start by looking within the S&P/ASX 200 Index (ASX: XJO). In fact, I would start by looking at the below companies as I believe they make great candidates if you’re looking to invest today on your children’s behalf.
Washington H. Soul Pattinson and Co Ltd (ASX: SOL)
I would be hard-pressed not to recommend an investment house like ‘Soul Patts’ as a candidate for a child’s portfolio. It has been listed and paying dividends for over 100 years.
Additionally, it has far outperformed the All Ordinaries (ASX: XAO) since 2000. Soul Patts’ managing director, Todd Barlow, recently commented: “Over the last 20 years to 31 January 2020, an investment in WHSP with dividends reinvested has increased by 11.1 times while the Index has increased just 4.2 times.”
Soul Patts makes its money through a diverse range of investments – from stakes in ASX shares such as TPG Telecom Ltd (ASX: TPM), coal miner New Hope Corporation Limited (ASX: NHC) and building supplies manufacturer Brickworks Limited (ASX: BKW), to investments in unlisted equity, real estate and credit.
If there was a downside, it would be that Soul Patts does not currently offer a dividend reinvestment plan. This would mean, depending on the size of the investment, you would have to manually reinvest the dividend payments periodically (if you’re so inclined).
Altium Limited (ASX: ALU)
Altium is a bit more of a growth story when compared to Soul Patts. It does currently pay a small dividend, however, which will likely increase long term. But its return is likely to be more skewed towards capital growth, which I think is ideal when trying to grow a portfolio long term as you are not required to pay any capital gains tax until the shares are sold.
Altium has grown strongly recently, pushing it well into the ASX 200. The demand for its software has been growing and it is currently aiming to achieve 100,000 Altium Designer subscribers by 2025.
In addition, Altium recently noted that it is “operationally and commercially well positioned, with electronic design anticipated to be relatively resilient to weather the prevailing and unfolding market conditions”. This gives me confidence in the short term, with a tailwind provided by the Internet of Things boom and its growing market share giving me confidence for the longer term.
Foolish takeaway
I would be happy to purchase both of these companies for a child’s portfolio with a long-term view. Alternatively, if you’re looking for something requiring less ‘thought’, an investment in the BetaShares Australia 200 ETF (ASX: A200) is an option. This gives you a portion of each of the largest 200 ASX-listed companies and has a dividend reinvestment plan.
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More reading
- Are rental yields better than dividend yields?
- These were the best performing ASX 200 shares last week
- How to earn $50,000 of passive income with ASX shares
- ASX shares can help millennials retire before their parents
- 2 ASX shares for a first-time investor
Motley Fool contributor Michael Tonon owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Altium. 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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