Saturday, August 15, 2020

Where to invest your first $500 into ASX shares

Businessman paying Australian money, ASX shares

If you’re looking to make your first investment in the share market, then you’re in luck.

I believe there are a good number of ASX shares which have the potential to generate strong returns for investors.

If you have just $500 to invest, then I would suggest you think long-term. This is because brokerage costs will inevitably eat into your profits if you are constantly buying and selling shares.

But which shares should you buy? I think these 3 ASX shares would be great long-term options for a $500 investment:

Electro Optic Systems (ASX: EOS)

Electro Optic Systems is an exciting company which I believe could be destined for big things. It is Australia’s largest aerospace company and the largest defence exporter in the Southern Hemisphere. I’m a big fan of the company due to its highly experienced team and the long-established partnerships it has with major global aerospace giants. Another big positive is that it has just entered into contract negotiations with the Australian Government for the acquisition of 251 Remote Weapon Stations and related materiel. Combined with its massive backlog of work, I believe it is well placed to deliver solid earnings growth over the next few years.

Nearmap Ltd (ASX: NEA)

Another option to consider buying with the $500 is Nearmap. It is an aerial imagery technology and location data company with operations in the ANZ and North American markets. Although FY 2020 has been a tough year and it is going to fall short of its original guidance, this underperformance was largely out of the hands of management. In light of this, I think investors should look beyond this short term weakness and focus on its very positive long term outlook. Nearmap’s high quality software has given it a leading position in a highly fragmented market currently worth $2.9 billion per year. This is materially more than the annualised contract value (ACV) of $103 million to $107 million it now expects to achieve in FY 2020. Furthermore, Nearmap has the option to increase its addressable market by expanding into other territories in the future.

NEXTDC Ltd (ASX: NXT)

NEXTDC is an innovative data centre-as-a-service provider which I think could be a great option for a $500 investment. It has a growing number of centres in key strategic locations across Australia which are providing the infrastructure platform for the digital economy. Demand for capacity in its centres has been so strong this year the company has had to bring forward expansion plans. This appears to have put it in a position to report a very strong full year result next month. And with the cloud computing boom expected to accelerate over the next decade, I believe NEXTDC is well-placed to deliver strong earnings growth for the foreseeable future.

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James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited and Nearmap Ltd. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited and Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Where to invest your first $500 into ASX shares appeared first on Motley Fool Australia.

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