There are a number of ASX shares that could be good to invest $500 into.
Plenty of beginner investors may be well suited to an exchange-traded fund (ETF) like BetaShares Global Quality Leaders ETF (ASX: QLTY) and Vanguard MSCI Index International Shares ETF (ASX: VGS).
But I think there are ASX shares that could be better choices than that. Here are two options:
Growth: Bubs Australia Ltd (ASX: BUB)
The best way to beat the market over the longer-term is with ASX growth shares. Smaller businesses have much more growth potential than large blue chips which are already mature businesses.
It's much easier to double profit from $10 million to $20 million than it is for a blue chip to grow profit from $1 billion to $2 billion.
Bubs is one of those ASX shares that I think has great growth potential for a few key reasons.
Bubs is an infant formula business, which specialises in goat milk products. But it also sells other products like baby food and organic grass-fed cow milk infant formula. The company also recently announced the launch of Vita Bubs – a range of vitamin and mineral supplements.
It's the international growth and rising margins which particularly excite me. A2 Milk Company Ltd (ASX: A2M) has shown how overseas growth can really add to the bottom line.
In FY20 the ASX share grew its total revenue by 32% to $62 million. The FY20 fourth quarter showed Chinese direct sales increase by 26% and other export market sales increased by 71%. Asia alone is a huge market which Bubs can tap into over many years.
Bubs has reported that its gross profit margin has steadily grown over the past few results to 24%. I think it can grow much higher considering the infant formula gross profit margin is around 40% – and infant formula is becoming a larger part of the business.
Over the next five or ten years, I think Bubs could become a much larger business.
Dividends: Future Generation Investment Company Ltd (ASX: FGX)
Future Generation is a listed investment company (LIC) with a major difference. There are no management fees or performance fees involved with this ASX share. Most LICs have fund managers that charge fees.
Future Generation is actually invested in the funds of around 20 fund managers that invest in ASX shares. These fund managers work for free so that Future Generation can donate 1% of its net assets each year to youth charities. Hence the name 'Future Generation'.
As a LIC, Future Generation has the option of paying out a lot of the underlying investment returns as a growing dividend to shareholders. That's exactly what Future Generation has been doing. In the recent FY20 half-year result it increased its interim dividend by 8.3%.
At the current Future Generation share price it offers a grossed-up dividend yield of 6.9%. I think that's a solid yield in the current environment where the RBA interest rate is so low. I'd happily buy it for yield.
During the six months to 30 June 2020 the ASX share's gross portfolio return outperformed the S&P/ASX All Ordinaries Accumulation Index by 3.3%. Over the prior 12 months the gross portfolio return was 6% better than the index. That's a solid outperformance during COVID-19 in my opinion.
At the current Future Generation share price it's valued at a 7% discount to the June 2020 net tangible assets (NTA) per share. There's a fair chance the NTA will have risen since then.
Foolish takeaway
I think both of these ASX shares would be a solid long-term investment with $500. At the current prices I'd probably go for Bubs as it has fallen back a bit since its FY20 fourth quarter update. However, Future Generation offers a lot of attractive diversification considering it's a fund of funds.
