If I were just starting out with shares, I'd want to own investments that are simple to understand and have the potential to deliver attractive long-term futures. I'm going to call these ASX beginner shares.
I think it's a good idea to invest in businesses that could be worth more over three years, five years and ten years. Simple investments shouldn't need extraneous levels of analysis to know if their profit generation is likely to grow in the coming years.
Below are three ASX beginner shares that I think could be smart choices for investors in their 20s, or at any age.
Vanguard MSCI Index International Shares ETF (ASX: VGS)
Owning an exchange-traded fund (ETF) is one of the simplest ways to invest. This type of investment means we can buy a whole basket (portfolio) of shares in one purchase. An ETF can provide us with instant diversification.
The Australian stock market is a very good place to invest, but it's home to just 2% of the global share market. I believe it's also a good idea to own a piece of the international share market.
The VGS ETF is invested in more than 1,360 businesses. This is a significant number and spreads out the risks, so if something goes wrong with a particular share, investors won't feel much pain.
Its largest positions include business giants like Apple, Microsoft, NVIDIA, Alphabet, Amazon.com, Meta Platforms (Facebook and Instagram), Tesla, Berkshire Hathaway, Visa, Mastercard, Home Depot, Costco, Johnson & Johnson, Walmart and Netflix.
The portfolio has assets from around the world. The United States, Japan, the United Kingdom, Canada, France, Switzerland, Germany, and the Netherlands all have a weighting of more than 1%.
Of course, past performance is not a reliable indicator of future performance, but over the last five years, the VGS ETF has returned an average of 12.6% per year.
Rural Funds Group (ASX: RFF)
Another option to consider is a real estate investment trust (REIT), which allows investors to invest in commercial property. There are plenty of different types of commercial properties, such as shopping centres, offices, industrial properties, storage units, and so on.
Rural Funds owns various farms, including cattle, vineyards, almonds, macadamia, and cropping. I think it's wise to have a diversified farming portfolio across different Australian states and climate conditions.
The beginner ASX share makes a steady rental profit each year, which funds useful distributions to investors each year. It expects to pay a distribution yield of 6.3% in FY25.
The current Rural Fund's share price is trading at a discount of approximately 40% to its stated underlying value in June 2024, as measured by the adjusted net asset value (NAV).
Temple & Webster Group Ltd (ASX: TPW)
Online homewares and furniture retailer Temple & Webster could grow significantly in the coming years, in my view. It's currently trading at a lower price, down 17% since 14 October, so I think now is a good time to invest.
Over time, more Aussies are buying items online, which is a very useful tailwind for this beginner ASX share. Temple & Webster is utilising technology and AI throughout its business to try to serve customers better and improve profit margins. Temple & Webster is using AI for its customer chats, which is helping customer conversion.
In the next few years, the company is hoping to reach $1 billion in annual sales, which could provide scale benefits. For example, the company's fixed costs are being spread across more sales and customers.
In five years, I think Temple & Webster's profit could be much higher, which could help the company's share price rise in the longer term.
