Your 40s could be the best time to start investing because you could be at the peak of your earning power.
Despite some financial responsibilities, the easiest time to put money to work is when you have the most money coming through the door.
Investors if their 40s should still go for growth, but if you’re at ‘peak earning’ you don’t want to be receiving a lot of investment income, as that’s likely taxable. It’s also likely that most of your wealth is Australian-based with superannuation and property based in the lucky country. If that’s the case, you could do with some low-income, high growth investments that are mainly overseas based.
With that in mind, the below investments could be investments for people in their 40s:
iShares S&P 500 ETF (ASX: IVV)
Legendary investor Warren Buffett says that most people would do well by simply investing in a low-cost S&P 500 fund, which is what my first suggestion is.
The S&P 500 is an index of 500 of the best businesses listed in the US. Many of the biggest holdings are truly global businesses including Microsoft, Apple, Alphabet (Google), Amazon, Facebook, Berkshire Hathaway and so on – these are not just ‘US shares’, they are worldwide businesses.
It’s very hard for professional investors to beat this index over the long-term, so why not be happy with the very-pleasing performance of the market average?
The fact that it comes with a very low-cost management fee of 0.04% means almost all of the returns belong to us. A trailing distribution yield of 1.8% doesn’t sound great, but the ETF just passes through the income it receives – US-based businesses are more prone to re-invest for further growth. The dividends can grow at a faster pace.
Future Generation Global Investment Co Ltd (ASX: FGG)
However, I can understand if you want exposure to more than just the US market.
Future Generation Global Investment is a listed investment company (LIC) which invests in an array of Australian funds which invest in overseas shares. Whilst some of the underlying holdings will be based in the US, there will be investments in Europe, Canada, Asia and so on.
However, this LIC doesn’t charge any management fees or performance fees, and neither do the underlying investment managers. That’s because 1% of the LIC’s net tangible assets (NTA) are donated to youth mental health charities each year, which is a great bonus about this LIC.
The Future Generation Global’s gross portfolio return has outperformed the MSCI AC World Index (AUD) over the past six months, one year and since inception (in September 2015). There are no outperformance fees, so shareholders get to keep the outperformance.
Brickworks Limited (ASX: BKW)
Brickworks is a construction business. The construction industry is going through a bit of a rough patch at the moment, but Brickworks has been a long-term profit grower for quite a while.
Why could now be a good time to buy? Its large stake in quality investment business Washington H Soul Pattinson and Co. Ltd (ASX: SOL) means that, if you take the Soul Patts asset at market value, you get the rest of Brickworks’ business for almost nothing.
That sounds particularly attractive to me with Brickworks recently announcing the acquisition of the fourth largest brick business in the US, Glen Gery, for $151 million. The US is a huge market, which could drive Brickworks’ growth for years to come.
All three of these ASX shares could make excellent long-term investments for an investor in their 40s. At the current prices I’d be very happy to buy shares of Brickworks for the large exposure to Soul Patts.
Where to invest $1,000 right now
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Brickworks. 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.