If I were in my 20s, I'd buy ASX shares that could deliver pleasing long-term capital growth.
Gains aren't guaranteed. However, I think they're more likely to come from businesses with major growth plans and/or a high return on equity (ROE), given the relationship with profit growth.
Growing profit is normally what sends share prices higher, so investors could continue to be attracted to these sorts of businesses.
I'm going to talk about two investments on the ASX that tick the box for me. One of them is an exchange-traded fund (ETF), but it's available to Aussies, so I'm calling it an ASX share.
VanEck MSCI International Quality ETF (ASX: QUAL)
This fund is built to provide investors with exposure to some of the strongest businesses in the world.
It takes a formulaic approach, rather than requiring the opinion of fund managers to decide on the quality of those companies.
There are three key factors that count towards a quality score for businesses. First, a high ROE, second, earnings stability and third, low financial leverage.
This means the businesses make a lot of profit on shareholder money retained within the business, profit doesn't (usually) fall, and the businesses have little debt considering the scale of the company.
This combination of factors is very appealing because a company that has all three attributes is likely to deliver good profit growth.
Past performance is not a guarantee of future performance of course, but in the five years to 31 March 2025 the QUAL ETF returned an average of 16% per year. I think this demonstrates the quality of the underlying businesses and they could continue doing well in the coming years.
Tuas Ltd (ASX: TUA)
Tuas is a telecommunications business based in Singapore. The ASX share has won over 1 million mobile services with a focus on providing great value. At the end of 31 January 2025, being the FY25 first half, it reached 1.16 million subscribers (up 23.7% year-over-year).
Excitingly, the ASX share has also recently started with a home broadband offering. It had 14,347 broadband subscribers at the end of the HY25 result and I'm optimistic it can add tens of thousands of customers in this division in the coming reporting periods.
The business has grown rapidly and I'm excited about what it can achieve in the coming years, particularly if it expands to other Asian countries such as Malaysia and Indonesia. HY25 revenue grew 33.8% to $73.2 million and operating profit (EBITDA) jumped by 47.8% to $33.1 million. It's a great sign that profit is growing faster than revenue because it could mean margins could continue rising in the coming years.
I'd happily buy more of this ASX share at the current Tuas share price because of its earnings growth potential over the next five years.
