When considering suitable ASX share picks for younger Aussies, such as those aged in their 20s, I'd point to companies that have the potential to deliver significant capital growth.
Passive income may appeal to many investors, but it is taxed in investors' hands each financial year. Capital growth is taxed only when the asset is sold. The more capital growth, the better.
We can't know for sure what direction share prices will take in the future, but I believe the underlying financials of the two investments below are poised to do well in the long term.
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Tuas Ltd (ASX: TUA)
Tuas is an ASX share worth more than $2 billion that could grow its operations significantly. In my view, it is one of the most compelling ones.
The Singaporean telco has rapidly grown in the Asian country to service more than 1 million subscribers. In the first quarter of FY25, Tuas reported that its subscribers had grown by 26.6% year over year. This helped boost revenue by 33% year over year to $35.5 million in the first quarter. Operating profit (EBITDA) jumped 46.3%.
This shows that the company is growing revenue strongly and demonstrating operating leverage where profit rises faster than revenue.
It's also exciting to see that Tuas has grown its number of broadband subscribers from more than 4,000 at the end of FY24 to more than 10,000 active subscribers as of 30 November 2024.
While the business can keep growing in Singapore, I'm particularly excited by the potential of this ASX share to expand to other countries with much larger populations, such as Indonesia, Malaysia or other Asian countries.
VanEck MSCI International Quality ETF (ASX: QUAL)
This is one of my favourite exchange-traded funds (ETFs), not just because of the returns but also because of how the portfolio is constructed.
For starters, it offers an appealing amount of diversification – it's invested in approximately 300 businesses. That's 100 more than the amount of companies in the S&P/ASX 200 Index (ASX: XJO). However, the QUAL ETF offers better diversification because its holdings are from across the world.
The ASX ETF looks for businesses that are achieving a high return on equity (ROE), earnings stability and low financial leverage. When you look at the businesses that rank highly on all three of those elements, what's left is a group of arguably the world's best and most profitable businesses.
Over the past decade, it has delivered an average annual return of 15.7%, outperforming the global share market by an average of more than 2.5% per annum. Not many ASX shares have delivered that type of return.
