New to investing? I'd buy $500 of this long-standing ASX share to start a portfolio

This 95-year old company could be the perfect fit for a new investor.

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If you're new to the stock market and have $500 to invest, congratulations! Getting started on what will hopefully be a lifelong journey of building wealth is something that more Australians should be doing. And we know that ASX shares are one of, if not the, best paths to wealth available to ordinary Australians.

But deciding to invest in shares is just the beginning. Many investors are quickly overwhelmed by the sheer array of investments that are available in today's markets. To make the process easier for any prospective new investors, today we'll discuss one ASX share that I think is perfect for your first $500 investment. Not to mention a great choice to build a portfolio around in the future.

The Australian Foundation Investment Co Ltd (ASX: AFI) is one of the oldest companies on the ASX. AFIC first opened its doors way back in 1928. Ever since, this listed investment company (LIC) has pretty much been doing one thing. That is managing a conservative portfolio of ASX shares on behalf of its investors.

Most shares on the ASX represent an interest in just one business. For example, when you buy Commonwealth Bank of Australia (ASX: CBA) shares, you are buying a part-ownership in CBA, and nothing more.

But that's not the case with AFIC. This company's value rests on its huge portfolio of underlying shares and assets. As such, when you buy a share of AFIC, you are gaining partial ownership of AFIC's own share portfolio.

Why I'd pick this ASX share for a first $500 investment

Most of AFIC's portfolio is made up of other blue-chip ASX shares. According to the company's recent annual report, almost 80% of its portfolio came from 25 ASX shares. The most prominent of these were BHP Group Ltd (ASX: BHP), CSL Limited (ASX: CSL), Macquarie Group Ltd (ASX: MQG), Transurban Group (ASX: TCL), and CBA.

But it also includes other names such as Telstra Group Ltd (ASX: TLS), Coles Group Ltd (ASX: COL), and National Australia Bank Ltd (ASX: NAB).

So with one single investment, you are getting access to a huge, diversified, and conservative share portfolio that houses many of the ASX's top companies. AFIC has a decent track record of delivering consistent performance for its investors too.

As of 30 June, the company tells us that investors have enjoyed a total shareholder return (including dividends and franking credits) of 10.1% per annum over the past three years.

You don't have to worry about individual companies and the woes they might be facing. AFIC manages the portfolio on your behalf, making it a great bottom-drawer investment. AFIC also tends to pay a pretty decent dividend. Right now, AFIC shares offer a trailing dividend yield of 3.59%. That comes fully franked as well.

It's for all of these reasons that I think AFIC is a great choice for a $500 investment that you can build a portfolio around going forward.

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank and Telstra Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group and Telstra Group. 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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