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Where I’d invest my first $500 into ASX shares

Choosing where to invest your first $500 could be a difficult call to make.

For nearly every beginner investor, $500 is probably a lot of money. You wouldn’t want to go up in smoke with a high-risk investment, you want to have a good start to your investing. And there are so many choices!

Some people say that beginners should invest in what they know, which could mean something like Commonwealth Bank of Australia (ASX: CBA) or Woolworths Group Ltd (ASX: WOW). I’m not sure that would be a wise long-term investment decision.

One of the main problems for beginner investors is lack of diversification. With your first investment, all of your portfolio is in one business.

A way to counteract that could be to choose a diversified investment first such as an exchange-traded fund (ETF) or listed investment company (LIC). Something like Vanguard Australian Share ETF (ASX: VAS) or iShares S&P 500 ETF (ASX: IVV) could be good options to consider.

However, there’s one LIC that I think could be a very nice option: Future Generation Investment Company Ltd (ASX: FGX).

It is invested in the portfolios of a variety of ASX-focused fund managed portfolios which work for free and don’t charge any outperformance fees either. The only significant ‘cost’ is that Future Generation pays 1% of its net assets to youth charities each year, hence the name ‘Future Generation’. I think it’s a great initiative. 

It has outperformed the S&P/ASX All Ordinaries Accumulation Index since inception and has used some of that money to pay a growing fully franked dividend to shareholders. It’s great to receive increasing payments in these uncertain times.

Foolish takeaway

Future Generation Investment Company has a grossed-up dividend yield of 5.5% and is trading at a slight discount to the May 2019 net tangible assets (NTA) per share. I’d be happy to buy a small amount of Future Generation at today’s prices.

Other ideas to consider for a first investment are these high-quality ASX blue chips.  

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.

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