If you're looking to invest $1,000 into shares right now, then good for you! It's a great time to invest.
The share market may seem a bit intimidating at the moment because it has fallen heavily. The S&P/ASX 200 Index (ASX: XJO) is down around 30% because of the coronavirus.
Think of investing like going to the supermarket. There are plenty of options to choose from. When things are going on sale at the supermarket, we save money. When shares are a lot cheaper, we can buy pieces of great businesses for cheaper prices. Buyers should want to invest when prices are cheaper.
That's why I think it's a great to invest $1,000 into this share:
Future Generation Investment Company Ltd (ASX: FGX)
Future Generation is a listed investment company (LIC). The job of a LIC is invest in other shares or assets on behalf of its shareholders.
However, Future Generation is quite different to almost every other LIC. It invests in the funds of around 20 ASX-focused fund managers. Those fund managers work for free – no management fees or performance fees – so that Future Generation can donate 1% of its net assets to youth charities each year. It's a great initiative.
What's so good about it?
I think Future Generation is particularly attractive in this environment because of how diverse and defensive it is.
Each fund that Future Generation is invested in has its own portfolio, so its underlying diversification is very strong. There is also the option for those fund managers to change their investments and increase the cash holding, unlike other investments which have to stay in the same shares no matter what happens.
I also like that a good amount of Future Generation's invested funds are 'absolute' return funds. That means some of the funds are both long and short funds, which are able to make investment gains even in a falling market. It's one of the main reasons that Future Generation is able to outperform the ASX index when the market declines.
How about the dividend?
One of Future Generation's main objectives is to pay shareholders an attractive dividend. Preferably a growing dividend, assuming the profit reserves allow.
Its dividend is currently 5 cents per share, which translates to a grossed-up dividend yield of 8.1% and that dividend has been increased each year for the past few years. That's a solid yield.
It will be hard to grow the dividend with shares falling, but there could be a strong rebound on the other side.
Is it a good buy today?
With share prices changing so much each day, it's hard to get a feel for what discount Future Generation is trading at compared to its net tangible assets (NTA). I think the discount is at least 10%, which is a very attractive price to buy a solid share like Future Generation.
