I think that Future Generation Investment Company Ltd (ASX: FGX) is a great beginner ASX share and would be perfect for a $500 investment.
What is Future Generation Investment Company?
It's a listed investment company (LIC) which invests in the funds of ASX-focused fund managers. One of the main complaints about fund managers is that their fees reduce your returns over time. Future Generation doesn't charge any management fees or performance fees. The fund managers also don't charge Future Generation any management fees or performance fees.
Why do they work for free? It's so that Future Generation can donate 1% of its net assets to youth charities each year. The next generation is very important, it's our country's future, so an initiative like this is great.
Many of the service providers to Future Generation also provide their services for free.
Future Generation has generated solid returns since inception, its gross portfolio return has been 10.1% per annum since inception in September 2014.
As a LIC, it's able to turn those investment gains into a growing dividend. It has grown its dividend every year since it started paying one several years ago and it currently has a grossed-up dividend yield of 6.8%.
Why is it a great time to invest?
Since 21 February 2020 the Future Generation share price is down by 14%. It has lived up to its lower volatility target. However, it has still fallen so its share price and dividend yield are more attractive than before.
One of the best reasons to like Future Generation is that it has a diverse portfolio. Each fund manager that it's invested in has a separate portfolio, which means Future Generation has excellent underlying diversification.
On 31 January 2020 it was trading at a discount of 12% to its pre-tax net tangible assets (NTA) per share. I imagine the discount will still be above 10% at this lower price.
Being able to buy a solid business at a good discount is always good. It's even better at this lower price.
