I think investing in (ASX) shares can be one of the best choices a young Aussie could make. Money may not grow on trees, but wealth can be created on the share market.
I wouldn't think of investing in shares like going to the casino and betting. Instead, beginners (and experienced investors) should look at the share market as the business market. Those businesses tell us everything we need to know about whether operations are going well or not, what their growth plans are and their financial health.
I'm going to talk about two ASX shares that could be great first investments that we could own with confidence for years.
Start line on the highway concept for business planning, strategy and challenge or career path, opportunity and change
Wesfarmers Ltd (ASX: WES)
One of the first places that people may start investing is in a business that they are familiar with.
Wesfarmers is not one of Australia's most valuable or recognised brands. But, it owns a number of businesses that are very recognisable: Bunnings, Kmart and Officeworks. It owns other businesses including Priceline, Target, a chemical, energy and fertiliser business called WesCEF, and an industrial and safety division.
Therefore, I'd say Wesfarmers may be one of the best blue-chip style businesses we can buy.
But, there's more to the investment case than just having major brands. Bunnings and Kmart are clear market leaders and they earn high returns on capital (ROC), while providing customers with a compelling value offering.
Wesfarmers continues to find ways to help grow earnings such as opening new stores, expanding product ranges and expanding geographically. Bunnings has made a push in pet care and auto care products, while Anko products are being sold in other countries including Anko stores in the Philippines.
In five years, I believe the business could be larger and make significantly more profit.
Vanguard MSCI Index International Shares ETF (ASX: VGS)
One of the most effective places that a beginner investor could put their money is into a diversified exchange-traded fund (ETF) that provides exposure to the global share market.
The ASX share market is a great place to invest, but it's also a good idea to get exposure to international businesses. The ASX only makes up around 2% of the global share market – there are plenty of opportunities in the remaining 98% of the stock market.
One of the simplest ways to invest is the VGS ETF, which essentially gives exposure to most of the market capitalisation of the global share market. That's because it's invested in the world's largest companies listed in 'developed' countries. I'm calling this an ASX share because we can buy it on the ASX share.
With this investment strategy, there are numerous countries that have a weighting of at least 0.5% in the portfolio including: the US, Japan, the UK, Canada, France, Germany, Switzerland, the Netherlands, Sweden, Spain, Italy, Hong Kong, Denmark and Singapore.
It's invested in close to 1,300 businesses which, combined with the widespread geographic exposure, means that the VGS ETF offers enormous diversification.
Pleasingly, some of the best businesses in the world have become its largest holdings. We're talking about names like Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta Platforms, Broadcom, Tesla, JPMorgan & Chase and Berkshire Hathaway.
Past performance is not a guarantee of future performance of course, but it has delivered an average return per year of 12.7% over the last 10 years and 15.8% per year over the last five years.
