When you’re starting out investing it can be a hard to know where to start. There are so many options!
Do you go for a business that is really well known and you see in your everyday life like Commonwealth Bank of Australia (ASX: CBA), Woolworths Group Ltd (ASX: WOW) and Telstra Corporation Ltd (ASX: TLS)?
Solid advice would be to go for a high-quality exchange-traded fund (ETF) like Vanguard Australian Share ETF (ASX: VAS) or iShares S&P 500 ETF (ASX: IVV).
But I think there’s one share that would really be a good long-term option for beginners hoping for exciting returns:
MFF Capital Investments Ltd (ASX: MFF)
MFF Capital is a listed investment company (LIC). The job of a LIC is to invest in other shares, so it’s a nice way to get instant diversification from a single investment.
There are three or four key reasons why I think it’s a good option.
Number one, its investment focus is overseas shares. There are plenty of good businesses on the ASX, but there are more good opportunities in the rest of the 98% of the globe’s share market. Some of MFF Capital’s biggest holdings include Visa and MasterCard, which are some of the best growth shares in the world with the rise of cashless payments and online shopping.
Number two, it has been a solid performer. Past performance is not a guarantee of future performance, but it shows that MFF Capital’s investment team are good at picking opportunities. The MFF Capital share price has risen by 105% over the past five years.
Number three, low management fees. Any investment product like a LIC or ETF charges management fees so the lower the management fees the more of the investment returns you keep. MFF Capital has a fixed management fee so the fee as a percentage of assets gets smaller and smaller as the LIC grows in size.
Number four, it has a low grossed-up dividend yield of 1.7%. I think it’s better for a high-performing company to retain profit and re-invest into more opportunities. It also means that shareholders don’t have to pay much income tax when it comes to the dividends.
MFF Capital is trading at a discount of around 6% to its underlying net assets per share. I think it’s attractive to be able to buy a high-performing LIC at a discount, whereas you have to buy ETFs at their asset value.