I think one of the best things we can do for our children financially, aside from teaching them about money, is to invest in ASX shares for the long term and let compounding work its magic.
As a family, we like to occasionally invest for our child's future. At some point, that money can provide for them in some way, whether that's a lump sum for a specific purpose or regular dividends to contribute towards certain things.
For multiple reasons, we decided to invest in Future Generation Global Ltd (ASX: FGG).
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Diversification
Future Global Generation is a listed investment company (LIC) that's invested in the funds of more than a dozen fund managers. Some of the fund managers include Vinva, Life Cycle, Cooper Investors, Antipodes, Plato and Paradice.
That means the ASX share can provide investors like me with good diversification. The portfolio is invested in more than 3,000 underlying securities, which is amazing diversification in my view.
The portfolio is spread across a number of geographic regions, making it pleasingly diversified by market as well. Around half of the portfolio is invested in North America, approximately a fifth is invested in the UK and Europe, close to 10% is invested in Asia, approximately 5% in other developed markets, around 1% in emerging markets, and the rest is a cash position.
One of the most appealing aspects of Future Generation Global is that it donates 1% of its net assets to youth mental health charities. Some of the charities it supports include Youth Opportunities, Prevention United, Back Track, Big hArt, Happy Paws Happy Hearts and Smiling Mind.
Dividends
Future Generation Global is one of the most compelling ASX dividend shares around, in my view. It offers an attractive combination of a good dividend yield and rising payouts.
The business has steadily increased its annual payout each year since FY19. Many large ASX shares haven't delivered consistent payout growth this decade amid COVID-19 and inflation headwinds.
The business has guided its regular dividend is going to be hiked by 5% to 8.4 cents per share. That translates into a grossed-up dividend yield of 7.5%, including franking credits, at the time of writing.
Few ASX businesses have a dividend yield that high and have increased their payout for as many years in a row.
If I want to access the dividends over time, then this is a very rewarding choice.
Total shareholder returns
A key reason why I wanted to choose this ASX share with my child in mind is that it's a great choice for long-term compounding. By reinvesting the dividends, I think our Future Generation Global holding can increase in value.
The total shareholder return (TSR) measure tells investors how much of a return an investment has made when we include both the dividends and the capital growth.
Past performance is not a guarantee of future returns of course, but Future Generation Global has delivered an average TSR of 16.8% per year in the last three years and an average of 7.8% per year over the past decade.
This return is strong enough to help deliver pleasing compound growth over time.
