How I'd invest $10,000 into ASX shares today

Here's how I'd invest $10,000 into ASX shares today.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I believe that the ASX does have a few quality ASX shares, but as a whole the index is rather disappointing with too much of it focused on bank shares like Australia and New Zealand Banking Group (ASX: ANZ).

However, it's getting more difficult to consistently beat the market with so much coverage and information available to all investors.

But, if you invest in shares that offer a different earnings & risk profile to the ASX then you can do very well. That's why I'd consider the below shares with $10,000:

Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE) – $3,500

It might be possible to beat the returns of the ASX index simply by looking at a different index. The Asian index has its own huge tech shares, banks and telcos, just like the US market.

However, the Asian market is trading much cheaper than the US market due to pessimism arising from the trade war. According to Vanguard this exchange-traded fund (ETF) has a price/earnings ratio of only 12x. It looks even cheaper with the index's earnings growth rate being 11.5%.

With nearly 850 holdings, this could be a very good, very diversified ETF to hold over the next few decades.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – $2,500

Soul Patts could be my favourite business on the ASX. Its ultra-long-term history of operating for more than a century shows that it has excellent staying power.

The fact that it's an investment conglomerate allows it to shift its holdings as time goes on to where it thinks are good long-term opportunities. It has consistently managed to beat the ASX index over the long-term thanks to its unlisted and listed assets.

It has paid a dividend every year since inception in 1903 and it has increased its annual ordinary dividend each year since 2000. That is excellent reliability.

Soul Patts' share price has appreciated considerably over the past year, leaving its grossed-up dividend yield at only 2.8%.

WAM Microcap Limited (ASX: WMI) – $2,000

The best way to outperform the market may be to go for the smallest shares on the ASX because they are mostly undiscovered by institutional investors and they have the biggest growth runways because of their small size.

WAM Microcap looks for businesses with market caps under $300 million at the time of acquisition.

The Wilson Asset Management team are very effective at finding market-beating opportunities, the listed investment company (LIC) investment team is happy to sit in cash when it can't find a great idea.

Small caps can be very volatile, so I wouldn't recommend the average investor putting a huge amount of their portfolio into small caps, but a small cap-focused LIC could be a good way to do it.

WAM Microcap currently has an ordinary grossed-up dividend yield of 4.5%.

Naos Emerging Opportunities Company Ltd (ASX: NCC) – $2,000

This is another LIC that targets the smallest shares on the ASX, it looks at shares with market caps under $250 million.

However, Naos do things a bit differently. The LIC only holds a very small number of holdings, currently nine, meaning it has very high conviction in the shares that it invests in.

Naos announced today that it is going to maintain the dividend, which means based on the current share price it has a grossed-up dividend yield of 9.7%.

Foolish takeaway

Each of these shares have shown they can beat the ASX index and I think over the long-term all of them will create much better returns for investors than the All Ords. The Vanguard Asia index looks like the best value, which is why I allocated the most money to it, but I'd love to buy some more Soul Patts shares at a good price.

Motley Fool contributor Tristan Harrison owns shares of VANGUARD FTSE ASIA EX JAPAN SHARES INDEX ETF, WAM MICRO FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. 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.

More on ⏸️ ASX Shares

a woman wearing a close-sitting hat featuring wires and thick computer screen glasses clutches her computer monitor and looks shocked and disturbed as she reads old-fashioned computer text from the screen.
Technology Shares

Here's why ASX 200 tech shares (ASX:XTX) outperformed today

ASX tech shares have taken a turn for the better today.

Read more »

Worker in hard hat looks puzzled with one hand on chin
Resources Shares

Why did the Rio Tinto share price (ASX:RIO) have such a lousy 2021?

We look at what happened to this ASX 200 mining giant's shares last year

Read more »

a miner wearing a hard hat smiles as he stands in front of heavy earth moving equipment on a barren mine site.
Share Gainers

Here's why the Rumble Resources (ASX:RTR) share price is climbing 5%

The mineral explorer's share price is on the rise amid promising drill results.

Read more »

share price high, all time record, record share price, highest, price rise, increase, up,
⏸️ ASX Shares

Here are the top 10 ASX 200 shares on Wednesday

Here are your top 10 biggest gainers in the ASX 200 on Wednesday.

Read more »

comical investor reading documents and surrounded by calculators
⏸️ ASX Shares

The ASX reporting wrap-up: WiseTech, Bravura, Seven Group

Just what the investor ordered. Here’s a recap of the companies that reported on Wednesday...

Read more »

Doctor performing an ultrasound on pregnant woman
⏸️ ASX Shares

The ASX reporting wrap-up: Ansell, Kogan, Nanosonics

Just what the investor ordered. Here’s a recap of the companies that reported on Tuesday...

Read more »

blue arrows representing a rising share price ASX 200
⏸️ ASX Shares

Here are the top 10 ASX 200 shares on Tuesday

Here are your top 10 biggest gainers in the ASX 200 on Tuesday.

Read more »

unhappy investor considering computer screen
Share Market News

The ASX reporting wrap-up: Charter Hall, Ampol, NIB Holdings

Just what the investor ordered. Here’s a recap of the companies that reported on Monday...

Read more »