Insights

Where I’d invest $500 into ASX shares instantly

If I were going to invest $500 into ASX shares right now, I’d choose to invest it into Future Generation Global Invstmnt Co Ltd (ASX:FGG).
The post Where I’d invest $500 into ASX shares instantly appeared first on Motley Fool Australia. –

International diversification

I think it’s always a good time to invest into ASX shares in my opinion. Whether you have $500 or $50,000 to invest, there are going to be some businesses worth buying.

The next few weeks and months could be volatile with the imminent US election and the rising number of COVID-19 cases in the northern hemisphere, particularly in the US and Europe.

Don’t worry, the ASX share market always finds something to be volatile about. Whether it’s something domestic or overseas, some investors react to various geopolitical events.

But the share market keeps generating long-term returns despite the news, politics and everything else that happens over the years.

I believe that any short-term volatility, such as this week’s, could be a buying opportunity. Here’s where I would invest $500 today into ASX shares:

If this is your first investment, or one of your first investments, then I think it’s worth thinking about your portfolio construction.

It’s good to be invested in a few different businesses for diversification purposes. But if you invest your first $500 into Commonwealth Bank of Australia (ASX: CBA) then your entire portfolio is made up of one business.

However, if you invest in an exchange-traded fund (ETF) or listed investment company (LIC) then with a single investment you’re buying a ready-made portfolio of multiple companies.

Future Generation Global Invstmnt Co Ltd (ASX: FGG)

Future Generation Global is a LIC that gives you exposure to global shares. But it doesn’t just represent one portfolio of businesses, it actually (currently) represents 13 portfolios of businesses. That’s because it’s invested in the funds of 13 fund managers that invest in global shares. The LIC probably offers exposure to hundreds of underlying shares through the various portfolios.

Those fund managers work for free so that the ASX share can donate 1% of its net assets per share to youth mental health charities.

Some of the fund managers that it’s invested in include Magellan Financial Group Ltd (ASX: MFG), Munro Partners and Cooper Investors. This group of 13 managers are meant to be some of best around.

I think the capability of the fund managers comes across in the returns of Future Generation Global’s overall portfolio. Over the past three years, its gross portfolio return was 13.4% per annum – 3% per annum better than the MSCI AC World Index (AUD). Over the past year the gross portfolio return was 13.6%, which was 9.7% better than the index. This is solid outperformance.

The managers that Future Generation Global has picked were chosen for their ability to perform throughout the market cycle, particularly during tougher times. That’s why the portfolio has managed to outperform the global index by so much over the past 12 months.

There are also a number of other benefits about investing in Future Generation Global today, aside from the good long-term returns.

Valuation and dividend

At the current Future Generation Global share price the ASX share is valued at a 14% discount to the net tangible assets (NTA) at the end of September 2020 (before the dividend). That’s an attractive valuation considering Future Generation Global has a long-term record of outperformance.

The ASX share does pay a dividend to investors. In 2020 it has paid a fully franked dividend of 2 cents per dividend. It only pays one dividend per year. At the current Future Generation Global share price it offers a grossed-up dividend yield of 2.1%. Whilst that’s not a big yield, I think it’s good because it means most of the profit and growth is retained within the LIC for more long-term growth.

Foolish takeaway

I think Future Generation Global is a great option for a $500 investment. I already own some shares in my portfolio, but I’m close to buying some more with the current NTA discount seemingly more than 10% right now.

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Motley Fool contributor Tristan Harrison owns shares of Future Generational Global Investment Company Limited. 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.

The post Where I’d invest $500 into ASX shares instantly appeared first on Motley Fool Australia.

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