Investing in ASX shares as a beginner could be overwhelming, so I'd want to choose assets that could deliver diversification and growth for the long term, and also pay dividends.
I like the idea of receiving dividends because it can be rewarding to receive the cash flow and still potentially get the benefits of capital growth as well.
Some people go for names that they might use in their daily lives such as Telstra Group Ltd (ASX: TLS) and Coles Group Ltd (ASX: COL). But, being invested in just one business doesn't seem to offer much diversification. It's useful to spread our eggs around a few different baskets.
If I had $500 to start investing, I'd consider putting it into one of these three.
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BetaShares Global Sustainability Leaders ETF (ASX: ETHI)
This exchange-traded fund (ETF) looks to give investors exposure to a portfolio of large global businesses that have been identified as climate leaders that have also passed screens that exclude companies with "direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations."
Some of the other exclusions include gambling, tobacco, for-profit prisons, alcohol, predatory lending and so on.
In summary, we can feel good about the shares this ETF owns in its portfolio.
It's invested in 200 names, across a range of countries – 70% of the portfolio is currently invested in the US, but other places are also well-represented including Japan, the Netherlands, Germany, Switzerland and the UK.
Some of the names it's currently invested in includes Nvidia, Apple, Visa, Home Depot and Mastercard. These sorts of businesses pay a dividend, though a relatively small one.
The ASX ETF has performed well after including the annual management fee of 0.59%. Over the past five years it has returned an average of 16.3% per annum, though past performance is not a guarantee of future performance.
Future Generation Australia Ltd (ASX: FGX)
Future Generation is a diversified listed investment company (LIC) that is invested in a wide array of ASX shares.
Unlike most LICs, it doesn't charge investors a management fee. Instead, it donates 1% of its net tangible assets (NTA) to charities that are focused on helping younger Australians. It's a great initiative.
The LIC's portfolio is invested in a portfolio of funds managed by various external portfolio managers that work for free, to enable those donations to flow. Some of the fund managers include Paradice, Bennelong, Regal, L1 Capital and Wilson Asset Management.
Future Generation aims to grow its dividend for shareholders each year, which it has done so since 2015.
The current grossed-up dividend yield is 8.5%. Since inception, the LIC's portfolio has outperformed the S&P/ASX All Ordinaries Accumulation Index (ASX: XAOA) by 1% per annum with Future Generation's return of 8.7% since September 2014, despite all of the volatility.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Pattinson is an investment business that has been operating for over a century and it's still going strong.
The ASX share is invested in a number of different sectors including telecommunications, resources, building products, financial services, agriculture and structured debt (yield).
In terms of ASX shares it owns, it has positions in TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Macquarie Group Ltd (ASX: MQG), BHP Group Ltd (ASX: BHP), Aeris Resources Ltd (ASX: AIS) and Tuas Ltd (ASX: TUA).
The company regularly invests in its portfolio in new opportunities to help grow its future value and cash flow. This strategy has enabled the ASX share to grow its annual ordinary dividend every year since 2000, meaning it has the longest dividend growth record on the ASX. The larger cash flow can help grow the dividend.
I think it's one of the most likely ASX shares to still be around in 20 years because of its investment style, so it's one we can just put in the bottom drawer and hopefully watch it grow.
