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Where should you invest your first $500?

Getting started in the share market is quite easy, you only need to invest $500 for your first investment.

But, the problem is that there’s plenty of investment options to choose from. Perhaps there are too many options to choose from.

A decade or more ago one of the best ‘first’ investment options might have been Australian Foundation Investment Co.Ltd. (ASX: AFI) (AFIC), which is a listed investment company (LIC) that has been operating for almost a century.

The idea of a LIC is that it invests in your behalf into long-term investment opportunities that will deliver good returns. AFIC specifically targets large chip ASX shares that can provide a good level of income which AFIC passes through to its investors with its own dividends.

However, there’s more to returns than simply the dividend. To benefit from the power of compound interest we need to choose shares that re-invest some of their profit for growth into the future.

That’s why MFF Capital Investments Ltd (ASX: MFF) could be an attractive LIC to consider. It also has low costs compared to most other investment managers, but it can invest anywhere it wants to in the world and it has been one of the highest-performing LICs over the past year thanks to its compelling picks.

Visa, MasterCard, Alphabet and Lowe’s are some of the picks that have delivered very strong returns. However, its portfolio is quite concentrated in its leading investment ideas.

But if you want a more diverse international investment idea then iShares S&P 500 ETF (ASX: IVV) could be the one for you. It’s an exchange-traded fund (ETF) that’s invested in many of the leading US-listed global businesses like Facebook, Microsoft, Amazon and so on. It has an extremely low management fee of only 0.04%, which leaves plenty of investment returns left for us. Warren Buffett, one of the world’s greatest investors, regularly suggests that ordinary people would do perfectly well by holding an ETF based on the S&P 500.

Foolish takeaway

If I were starting my investing journey today I would be very pleased to invest in MFF Capital as my first investment. I think its strong net performance can continue for many years, or at least as long as Chris Mackay is managing the portfolio. I also like it is looking to grow the dividend over time now. 

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Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd. 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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