There are a number of shares out there that I think would be good for investors in their 20s.
There are also shares that I don’t think are good for young investors. Shares like Commonwealth Bank of Australia (ASX: CBA) and AGL Energy Ltd (ASX: AGL) don’t fit the growth profile that people with time on their side should pick in my opinion.
Investors in their 20s have decades ahead. That means that choosing shares with long-term growth prospects, attractive returns on equity (ROE) and lower dividend payments are best.
I mention the lower dividend payments because if you receive most of your returns as dividends then you lose more of your returns to tax, earlier, along the way.
So, what are three options for young investors?
My first two ideas are exchange-traded funds (ETFs) that focus on high-growth areas.
BetaShares NASDAQ 100 ETF (ASX: NDQ) gives you exposure to 100 of the biggest technology shares listed on the NASDAQ like Apple, Facebook, Amazon, Microsoft and Alphabet (Google).
When you look at what has changed the most in the world over the past 20 years I’m sure you’d agree that it is technology that has been the most innovative. The businesses driving that change in the western world are mostly listed on the NASDAQ.
Over the next 20 years it’s very likely that those big shares will be the ones to continue changing the world. Or, they can hire the best people or acquire businesses that are creating the change. This ETF could be the best way to be exposed to the US tech giants.
Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE)
However, the NASDAQ isn’t the only place generating growth. The Asian region has done a great job of lifting hundreds of millions of people out of poverty over the past couple of decades.
The growth in the Asian middle class will see a growing trend with ‘middle class businesses’ such as banks, insurers, telcos, infrastructure and so on likely to become much bigger players.
This ETF gives exposure to shares listed in China, Hong Kong, Taiwan, India and other Asian countries.
It had a low price/earnings ratio of 12 at the end of September 2018, yet the overall index had an earnings growth rate of nearly 11% with a dividend yield of 2.6%.
There’s a lot to like about this ETF, although the risks are higher, such as government and regulation risk.
My other idea is an avocado-loving suggestion. Indeed, avocados are very healthy, there shouldn’t be so much hate for them. Costa Group Holdings Ltd (ASX: CGC) is one of the country’s biggest avocado growers – it also grows citrus fruit, berries, mushrooms and tomatoes.
Demand for healthy food is on the up, which is why Costa is predicting low double digit profit growth for the next three to five years. Profit can compound very nicely when growing at that pace.
It’s currently trading at under 22x FY19’s estimated earnings.
As a young-ish investor myself, these are exactly the type of shares that I’m currently looking to buy for my own portfolio.
All of them look good to me at the current prices, though I’m particularly attracted to Costa and the Vanguard Asian ETF based on their valuation and potential growth over the medium-to-long-term.
Another share that could be good for a young investor is this top ASX stock which is good value by most measures and is now expanding into Asia.
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Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and COSTA GRP FPO. 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.