Choosing where to invest your first $500 can be a challenge.
For most beginner investors, $500 is probably a lot of money. You wouldn't want it to go up in smoke with a high-risk investment, I'd like to think you want to have a good start to your investing. There are so many options to choose from!
Some people say that beginners should invest in what they know, which could mean something like Telstra Corporation Ltd (ASX: TLS) or Coles Group Limited (ASX: COL). However, I take that advice more to mean that you should think about what is suddenly gaining in popularity that you see with your own eyes like infant formula or Afterpay Touch Group Ltd (ASX: APT) when it was first getting attention.
One of the main problems for beginner investors is lack of diversification. After your first investment, your entire portfolio is in one business. Whilst many people would be well-suited with an exchange-traded fund (ETF) like BetaShares Australia 200 ETF (ASX: A200), I think there could be better options.
The ASX only accounts for around 2% of the world's total market capitalisation. It would be like saying you're trying to find the best school footy team by only selecting from 2% of Australia's schools. Sure, you'd get a decent team together, but the other 98% is definitely worth looking at.
That's why I think a listed investment company (LIC) like MFF Capital Investments Ltd (ASX: MFF) could be the perfect choice. It has the investment flexibility to pick any shares in the world. Unlike ETFs that are limited by their focused region (the US, the ASX, Asia and so on), MFF Capital can design its portfolio for the best returns whilst not holding any of the poor investment ideas.
I'm valso ery attracted to it because it has a fixed management fee, so as its size grows the cost as a percentage reduces.
It has also been a top performer with average returns per annum of around 19% over the past five years according to Baillieu Research, thanks to high-quality holdings like MasterCard, Visa and Alphabet.
Foolish takeaway
If you're a beginner investor you probably don't need a lot of income, it's better for the company to keep most of the profit and re-invest for more growth, which is exactly what MFF Capital is doing.
