2023 was a pretty special year for Ampol Ltd (ASX: ALD) shares and the investors who owned them. For one, the year just gone saw this ASX 200 energy share rise by a rosy 27.8% – a gain that would delight any investor.

But Ampol shares shone on the income front as well. The company doled out a record level of dividend cash over 2023. The March final dividend of $1.05 per share, fully franked, was a huge increase over 2022’s corresponding 41 cents per share payment.

It was the opposite for the company’s September interim dividend though. Ampol paid out 95 cents per share (also fully franked) back in September, which was a drop from the $1.20 per share investors bagged at the same time in 2022.

Even so, Ampol’s ordinary dividend totalled $2 per share over 2023, which was a big increase on 2022’s total of $1.61. And we haven’t even got to the special dividend. Yep, Ampol shares dispatched a special cash dividend in March 2023 as well.

This payout was worth another fully franked 50 cents per share, bringing the company’s total payouts to $2.50. Both the $2 in ordinary dividend and the $2.50 in total dividends are records for Ampol in terms of passive income for shareholders.

Combined, those payments give the Ampol share price a trailing dividend yield of 6.78%. That grosses up to an impressive 9.69% yield with the value of those full franking credits.

However, these payments all reflect the past. As with any ASX dividend share, investors cannot just assume that this yield will hold over the coming 12 months. But should they? Let’s discuss whether Ampol will continue to be the divided beast it was in 2023.

Will Ampol shares shower investors with dividends again in 2024?

Well, it seems unlikely that Ampol will treat investors to the same stunning dividend in 2024 as it did in 2023.

Why? Well, the company’s special dividend that so dramatically boosted shareholder income last year appears to be something of a one-off.

At the time, Ampol told investors that this special dividend was a result of distributed “proceeds from asset sales to shareholders”. These asset sales presumably include the likes of Ampol’s NZ$522 million sale of Gull to Allegro Funds Pty Ltd in 2022.

So it’s probably safe to say investors shouldn’t be baking in an expectation of another $2.50 in dividends in 2024.

But that doesn’t mean Ampol shares won’t be generous dividend payers this year.

CommSec consensus dividend forecasts are currently predicting that Ampol will still be able to fund a total of $1.80 in dividends per share over 2024. That drops to $1.63 in 2025.

Of course, those are just projections. But if accurate, they would see the Ampol share price trading on forward yields of 4.88% and 4.42% today. Although that’s no 6.78% yield, it’s also certainly nothing to turn one’s nose up against.

The post Will Ampol shares pay another monster dividend in 2024? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The All Ordinaries index is having a decent session on Thursday. At the time of writing, the index is up 0.3%.

And while a green day is always welcome, this gain pales in comparison to what some ASX All Ordinaries shares are recording today.

Here are three ASX shares up over 10%:

AGL Energy Limited (ASX: AGL)

The AGL share price is currently up over 12% to $8.95. Investors have been snapping up the energy giant’s shares today in response to a very strong half-year update. The company reported a 20% decline in revenue to $6,183 million but a 358.6% increase in underlying profit after tax to $399 million. This strong profit growth was driven partly by higher wholesale electricity pricing from prior periods being reflected in pricing outcomes and contract positions. This allowed the company to increase its interim dividend by 225% to 26 cents per share.

Hutchison Telecommunications (Aus) Ltd (ASX: HTA)

The Hutchison Telecommunications share price is up a sizeable 12% to 2.8 cents today. Interestingly, this is despite there being no news out of the ASX All Ordinaries share this morning. Though, it is worth noting that the company’s shares are somewhat illiquid and only a small volume has been traded so far today.

Syrah Resources Ltd (ASX: SYR)

The Syrah share price is 12% to 50.5 cents. While there has been no news out of this graphite producer either, it certainly isn’t illiquid. A lot of shares have been changing hands today as investors continue to flood back into beaten down battery materials shares. This latest gain means that Syrah’s shares are now up by an impressive 29% since this time last week. Though, that still doesn’t change much on a 12-month basis. Over that period, the company’s shares are down approximately 75%.

The post 3 ASX All Ordinaries shares rocketing over 10% today appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Owning BHP Group Ltd (ASX: BHP) stock means having a small piece of Australia’s biggest company. There are a number of things investors should know about it.

BHP currently has a market capitalisation of around $240 billion, compared to $191 billion for Commonwealth Bank of Australia (ASX: CBA).

Its market capitalisation is not the most important thing to know about the ASX mining share. I’d suggest it’s important to know the following three things.

The iron ore earnings are cyclical

Humans seem to have a habit of assuming that what’s happening in the short term will continue for a long time. Sometimes that’s correct. But it’s important to recognise that some things are likely not to continue forever, particularly when they have a history of being cyclical.

Iron ore supply and demand is definitely one of those things I’d call cyclical. Most of the world’s iron ore is bought by China – sometimes demand is strong from the Asian superpower and sometimes not.

The iron ore price is currently around US$130 per tonne, but it has been under US$90 per tonne a couple of times in the 2020s so far. While BHP and other ASX iron ore shares are able to make big returns right now, thanks to growing demand in China for things like (electric) vehicles, the Chinese property market is currently reportedly weak.

It’s important not to assume that the iron ore price will stay at U$130 per tonne for years or even months.

At the moment, the estimate on Commsec suggests BHP could generate earnings per share (EPS) of $4.10, putting the BHP stock price at 11 times FY24’s estimated earnings.

BHP is a world leader

While the market capitalisation doesn’t necessarily do much to help the company make more profit, its enormous operating scale does help.

It’s one of the biggest mining businesses in the world and one of the lowest-cost miners globally.

In the ‘bad’ times, being a very low-cost operator means that it can continue making a profit even if conditions are bleak. In the good times, it means it can make exceptional profits and returns.

When the business is making good profits it can pay very pleasing dividends. The company currently has a minimum dividend payout ratio of 50%. For FY24, this could translate into a grossed-up dividend yield of 6.9% according to the estimate on Commsec.  

It’s actively diversifying towards greener commodities

BHP is best known for being an iron ore miner, but the company is working on growing its non-iron exposure and earnings.

For example, it recently acquired OZ Minerals which increased its exposure to copper.

It’s also working on a large potash project in Canada called Jansen. Potash is seen as a greener fertiliser, which could be helpful in a decarbonising world. It’s expected to earn an attractive earnings before interest, tax, depreciation and amortisation (EBITDA) margin and have a long economic life.

The world’s commodity demand changes as years go by, so having a greener focus could be increasingly important for BHP stock.

The post 3 things about BHP stock every smart investor knows appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Transurban Group (ASX: TCL) share price is edging higher on Thursday.

Shares in the S&P/ASX 200 Index (ASX: XJO) toll road developer and operator closed yesterday trading for $13.32. In morning trade on Thursday, shares are swapping hands for $13.33, up 0.1%.

For some context, the ASX 200 is up 0.3% at this same time.

This comes following the release of Transurban’s half-year financial results for the six months ending 31 December 1H FY 2024.

Here are the highlights.

Transurban share price gains on revenue increase

• Average Daily Traffic (ADT) increased 2.1% year on year to 2.5 million trips
• Proportional toll revenue increased 6.3% from 1H FY 2023 to $1.76 billion
• Proportional earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at $1.33 billion
• Interim unfranked dividend of 30 cents per share, up 13% from the FY 2023 interim dividend

What else happened during the half year?

Transurban noted that the 2.1% increase in traffic over the half year was driven by growth in all its operational regions, along with the opening of new assets.

Sydney’s Rozelle Interchange opened to vehicles in November. The company said the opening of the interchange completed the final piece of WestConnex.

The Transurban share price is in the green this morning, with the company noting that it managed to keep its operational cost growth at 1.7%. That ran below inflation, meaning that in real terms costs fell.

As at 31 December, Transurban had around $3.4 billion in corporate liquidity. 94.6% of its debt book was hedged.

What did Transurban management say?

Commenting on the update seeing the Transurban share price in the green today, CEO Michelle Jablko said the solid traffic result “combined with disciplined operational and financial cost management, has underpinned the financial performance seen in the first half of FY24”.

Jablko added:

Traffic in Brisbane has continued to grow, well supported by net migration. North America saw improved traffic performance, benefitting from return to office trends. Higher congestion and the time savings offered to our customers resulted in increased average toll prices, further complemented by additional access points opening on the Fredericksburg Extension.

She said that during the half year the company had been working with Google “to provide greater transparency on Google Maps in Australia, further empowering our customers to make informed travel choices”.

What’s next for Transurban?

Looking at what could impact the Transurban share price in the months ahead, the company maintained its FY 2024 dividend guidance at 62 cents per share. That’s up 7% from the full-year payout in FY 2023.

Transurban expects the dividend to include around 4 cents per share from WestConnex cash, which was previously held during construction.

“Longer term, we are well-positioned to deliver disciplined growth through existing opportunities, supporting the significant population growth that is forecast in key markets and emerging mobility trends,” Jablko said.

Transurban share price snapshot

The Transurban share price is down 5% since this time last year.

Shares in the ASX 200 toll road operator are up 13% since the recent lows on 31 October.

The post Transurban share price in the green amid 13% dividend boost appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Alliance Nickel Ltd (ASX: AXN) shares are on fire on Thursday.

In morning trade, the ASX mining stock is up a remarkable 83% to 5.5 cents.

Why is this ASX mining stock rocketing?

Investors have been scrambling to get hold of the nickel and critical minerals development company’s shares after it made a major announcement.

According to the release, the company has signed a non-binding term sheet with Samsung SDI for the future offtake of battery grade nickel and cobalt sulphate products from the NiWest Nickel-Cobalt Project in Western Australia.

Korea-based Samsung SDI is a world-leading battery and electronic material manufacturer aiming to redefine the worlds of electric vehicles, energy storage systems, and IT devices.

Subject to final negotiations of the definitive terms and conditions and satisfaction of customary conditions, it will enter into a binding offtake agreement with the ASX mining stock for an initial period of six years.

In addition, it was revealed that Samsung SDI and Alliance Nickel will discuss a potential acquisition by Samsung SDI of an equity interest in a project company to be formed by the latter that will hold the NiWest Project.

Management notes that this approach is consistent with its commercial strategy of aligning offtake agreements and project funding.

‘Delighted’

The ASX mining stock’s managing director and CEO, Paul Kopejtka, was delighted with the news. He said:

We are delighted to introduce Samsung SDI as a new potential long term strategic partner in the NiWest Project, particularly given the current challenging market conditions facing the critical minerals sector.

The term sheet is further validation of the credentials of the NiWest Project, its strategic significance to Tier-one automakers and battery manufacturers and the importance of the supply of specialty materials that comply with the US Inflation Reduction Act. Samsung SDI has an existing business relationship with our strategic partner and cornerstone investor Stellantis N.V. and we look forward to building a strong partnership as we move towards first production from NiWest.

The post Guess which ASX mining stock is surging 80% on deal with Samsung appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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News Corporation (ASX: NWS) shares are popping on Thursday.

In morning trade, the ASX 200 media stock is up over 9% to a 52-week high of $43.10.

Why is this ASX 200 stock jumping?

Investors have been buying the media giant’s shares after it released its second quarter results. Here’s a summary of what the company reported:

• Quarterly revenue up 3% to US$2.59 billion
• Total EBITDA was up 15.6% to US$473 million
• Net income jumped 95% to US$183 million
• Adjusted earnings per share up 86% to 26 US cents

What happened during the quarter?

For the three months ended 31 December, the ASX 200 stock reported a 3% lift in revenue to US$2.59 billion.

This was driven primarily by higher Australian residential revenues at REA Group Ltd (ASX: REA), continued strong growth in the Dow Jones professional information business, increased digital sales, and improved returns due to better sell through of Book Publishing inventory.

Offsetting some of this growth were lower revenues at Move due to continued challenging housing market conditions in the U.S. and lower advertising revenues at the News Media segment.

On the bottom line, the ASX 200 stock posted a 95% jump in net income to US$183 million. This reflects lower costs at the Book Publishing segment, gross cost savings, and improved equity losses of affiliates.

Management commentary

News Corp chief executive, Robert Thomson, was pleased with the quarter. He said:

News Corp again saw growth in both revenue and profitability this quarter as we continue to realize the collective benefit of our strategic shift to digital and subscription revenues, and away from sometimes volatile advertising revenues. Our net income rose to $183 million from $94 million in the same quarter last year and our reported EPS was 27 cents, compared to 12 cents for the same period last year, driven by a 16% surge in Total Segment EBITDA. We had particularly robust results across the three core pillars of our business – Dow Jones, Book Publishing and Digital Real Estate Services – and believe there are strong prospects for further growth as difficult macro conditions ease in some of our markets.

Thomson also spoke about the rise of generative AI and the role that News Corp can play in it. He adds:

We expect to be a core content provider for Generative AI companies, who need the highest quality, timely content to ensure the relevance and accuracy of their products. We patently prefer negotiation to litigation, courtship to courtrooms. But let’s be clear, in my view those who repurpose without approval are stealing and are undermining the very act of creativity – counterfeiting is not creating, and the AI world is replete with content counterfeiters.

The post Guess which ASX 200 stock is jumping on a 95% profit surge appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended REA Group. The Motley Fool Australia has recommended REA Group. 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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The REA Group Ltd (ASX: REA) share price is under pressure on Thursday.

In morning trade, the property listings company’s shares are down 4% to $176.17.

Investors have been X the company’s shares after it released its half-year results.

REA share price tumbles on half-year results

For the six months ended 31 December, REA reported:

• Revenue up 18% to $726 million
• Operating expenses up 11% $287 million
• EBITDA (excluding associates) up 22% to $439 million
• Net profit up 22% to $250 million
• Fully franked Interim dividend up 16% to $0.87 per share

What happened during the half?

REA had another strong half, delivering an 18% increase in revenue to $726 million for the period. This was driven by a 17% increase in Australia revenue to $682 million and a 21% lift in India revenue to $44 million.

In respect to its local operations, the company revealed that its flagship realestate.com.au website continues to dominate its market.

Approximately 10.6 million people visited each month on average, with 52% exclusively using realestate.com.au. In addition, it had 126.1 million average monthly visits, with visitors spending 3.0 times longer on realestate.com.au each month on average compared to the nearest competitor.

This helped support listings growth of 4% for the half nationally, with Sydney and Melbourne listings increasing 19% and 18%, respectively.

Failing to hold up the REA share price today was news that the company delivered positive jaws during the half despite the inflationary environment. Positive jaws is the term used to describe revenue growth quicker than costs.

REA’s operating expenses were up 11% to $287 million for that half. This increase was driven by remuneration increases, growth in technology costs and higher revenue-related variable costs. Excluding the impact of the CampaignAgent acquisition, group and Australia operating costs increased by only 9%.

This ultimately led to REA’s EBITDA and net profit increasing by an impressive 22% during the half, which allowed its board to boost its dividend by 16% to 87 cents per share.

Management commentary

REA Group CEO, Owen Wilson, was rightfully pleased with the half. He commented:

REA has delivered an outstanding result driven by strong yield growth and the benefit of a more normalised listings environment. This resulted in a strong uptake of our premium products as customers sought to leverage our leading audience to maximise their campaigns in the strengthening market. REA India’s momentum also continued with price and customer growth and new premium depth products delivering strong revenue growth.

How does this compare to expectations?

Goldman Sachs was pleased with the half, noting that it came in ahead of expectations. It commented:

Sales/EBITDA/NPAT +18%/+23%/+22% vs. pcp to A$726mn/A$426mn/A$250mn, which were +0%/+2%/+2% vs. GSe, with EBITDA +2% vs. Visible Alpha Consensus Data (A$415mn). With Dec-23 listings flat, the 3% deferral drag in the half was greater than expected, but this was offset by stronger Commercial/Developer revenue growth (+11%).

Outlook

Management is feeling positive about the second half but acknowledges that it could be softer.

It advised that Residential Buy yield growth is anticipated to be lower for the second half, because the first half outperformance of Melbourne and Sydney listings is unlikely to continue for the entire period.

In addition, it has lifted its cost guidance for FY 2024. This could be partly why the REA share price is falling today.

The company advised that “group operating cost growth in the mid to high-teens is anticipated in FY24, with positive operating jaws targeted.”

Wilson concludes:

We are very pleased with our first half result. The confidence that interest rates are at or very near the peak, should see the healthy market conditions we are enjoying today continue throughout 2024. We will continue to invest in further personalisation and new experiences for our audience, new products that will deliver further value for our customers and the increasing demands of consumers around privacy and data security.

The REA share price remains up over 40% since this time last year.

The post REA share price tumbles despite 22% profit jump appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended REA Group. The Motley Fool Australia has recommended REA Group. 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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The AGL Energy Limited (ASX: AGL) share price is on the move on Thursday.

In morning trade, the energy giant’s shares are up 15% to $9.16.

This follows the release of the company’s half-year results.

AGL share price rocket on stunning profit growth

Here’s a summary of how it performed for the six months ended 31 December:

• Revenue down 20.8% to $6,183 million
• Underlying profit after tax up 358.6% to $399 million
• Underlying earnings per share up 359.7% to 59.3 cents
• Interim dividend up 225% to 26 cents per share

What happened during the half?

As mentioned above, AGL’s revenue fell 20.8% to $6,183 million during the half. This reflects a 12.7% increase in Customer Markets revenue, which was offset by a 33% decline in Integrated Energy revenue.

But that couldn’t stop the company’s underlying profit after tax from increasing 358.6% to $399 million. Management advised that this reflects improved fleet availability and flexibility, more stable market conditions, and the impact of higher wholesale electricity pricing from prior periods being reflected in pricing outcomes and contract positions.

Whereas in the prior corresponding period, the company battled with volatile energy market conditions and forced plant outages.

In addition, management notes that Trading and Origination Gas and Consumer gross margin also increased despite overall lower customer demand.

Overall, this allow AGL to declare an interim dividend of 26 cents per share, which is up from 8 cents per share a year earlier. It will be paid to shareholders next month on 22 March.

Management commentary

AGL’s managing director and CEO, Damien Nicks, was pleased with the half. He said:

Our first half result was driven by improved fleet availability and flexibility, more stable market conditions, along with the impact of higher wholesale electricity pricing from prior periods being reflected in pricing outcomes and contract positions.

This improved result, compared with the challenges experienced in the first half of the prior year, which was impacted by volatile energy market conditions and forced plant outages, supports the ongoing investment in our transition. The increase in earnings from our well risk managed gas portfolio and customer business also contributed to this result, despite overall lower customer demand.

Outlook

Potentially giving the AGL share price an added boost today was its guidance for FY 2024. Management has narrow its guidance to towards the upper end of its previous range.

It expects underlying EBITDA between $2,025 million and $2,175 million (previously between $1,875 million and $2,175 million) and underlying net profit between $680 million and $780 million (previously between $580 million and $780 million).

The AGL share price is now up 15% over the last 12 months.

The post AGL share price rockets 15% after half-year profit surge appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Cochlear Limited (ASX: COH) shares are on the move on Thursday morning.

At the time of writing, the hearing solutions company’s shares are up 6% to $310.00.

Why are Cochlear shares charging higher?

Investors have been fighting to get hold of the company’s shares today after it released an update on its guidance for FY 2024.

According to the release, Cochlear has had a stronger than expected first half for cochlear implant revenue and therefore believes it will now outperform its guidance over the full year.

As a reminder, Cochlear was guiding to underlying net profit of $355 million to $375 million for FY 2024.

However, today’s update reveals that it is now guiding to underlying net profit in the range of $385 million to $400 million, which will represent a 26% to 31% increase on FY 2023’s result.

First half update

While its results will be released in full later this month on 19 February, management has given investors a taste of what’s to come.

It advised that it expects to report a first half sales revenue increase of 25% (20% in constant currency) to $1,113 million with underlying net profit of $192 million.

Cochlear’s CEO and President, Dig Howitt, commented:

Cochlear implant trading conditions have been strong across the first half, with units growing 14%. We have maintained the market share gains made in FY23 and market growth has continued to be robust across both developed and emerging markets, as well as all age segments – children, adults and seniors. The key change to our expectations is that we now expect to achieve 10-15% growth in our cochlear implant units for FY24 compared to the high single-digit growth expected in August.

The post Cochlear shares jump 6% on guidance upgrade appeared first on The Motley Fool Australia.

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More reading

• Why is the Cochlear share price tumbling 5% on Tuesday?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Cochlear. The Motley Fool Australia has recommended Cochlear. 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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ASX index funds are becoming an increasingly popular option for investors. Exchange-traded funds (ETFs) allow investors to buy a whole group of shares or assets in a single investment.

But, investors shouldn’t just buy something because it’s popular – that could mean chasing a crowd and being late to the party, which could result in losses if someone overpays.

There are many compelling factors to like ASX index funds, and I’m going to outline some of my preferred reasons to like them below.

Low management fees

One of the best reasons to like ASX index funds is how low the costs are. The fund providers aren’t trying to do extensive analysis, outperform the market or other things that result in costs.

Simply copying an index, like the S&P/ASX 200 Index (ASX: XJO) or S&P/ASX 300 Index (ASX: XKO), can be done very cheaply. Active fund managers might charge 1% per annum, whereas an option like Vanguard Australian Shares Index ETF (ASX: VAS) has an annual management fee of 0.07%.

Lowering fees can make a big difference to the long-term returns. If $1,000 is invested in an ASX ETF for 20 years and it makes 9% per annum it would grow to $6,009. If it rose by 10% per annum, it becomes $7,227. That’s 20.27% better overall, simply because of a slight difference in return/fees.

Diversification

A lot of ASX index funds which are based on broad-based indices can offer pleasing diversification. It’s good not to have all one’s eggs in the same basket. If an ASX ETF is invested in plenty of different assets and businesses, I think this can reduce the risk.

Some of the ETFs that offer strong diversification with excellent holdings include iShares S&P 500 ETF (ASX: IVV) and Vanguard MSCI Index International Shares ETF (ASX: VGS).

Passive investing

Some investments take a lot of management. I’d guess that a lot of people would prefer for their investments to take up as little time and mental effort as possible.

There’s no need to try to manage ASX ETFs – it’s simply being invested in a particular share market and tracking whatever happens.

I think ASX ETFs are much easier to manage than a residential property, a farm or other things.

Regularly changing portfolio

One of the main advantages, in my opinion, is that an ASX ETF’s portfolio is regularly changing.

Plenty of businesses fall by the wayside over time, and staying invested in those businesses would be to our portfolio’s detriment, in my opinion.

The fact that the ASX index fund portfolios change means they include the upcoming winners and ensures they can still be long-term investments as they sell down poor-performing investments.

Imagine if the VGS ETF was still invested in the businesses that were the biggest 30 or 40 years ago – it wouldn’t have done anywhere near as well as it has.

I think this is one of the best reasons why ASX ETFs can make solid long-term returns.

Good performance

Plenty of the good ASX ETFs have delivered good long-term returns, which would help investors grow their wealth.

Over the long term, the ASX share market and global share market have returned an average of around 10%.

If an investor were able to invest $1,000 per month into ASX index funds and the ASX ETF delivered an average return per annum of 10%, it would turn into $687,000 in 20 years.

I think investing in ASX index funds can be a very useful wealth-building activity.

The post 5 reasons to buy an ASX index fund today appeared first on The Motley Fool Australia.

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• Should I buy the Vanguard Australian Shares Index ETF (VAS) now or wait for an ASX dip?
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended iShares S&P 500 ETF. The Motley Fool Australia has recommended Vanguard Msci Index International Shares ETF and iShares S&P 500 ETF. 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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