Here are 5 ASX Stocks for young investors to buy

5 ASX Stocks for young investors to buy

If you’re a young investor, you are less likely to be a High Net Worth investor. You are less likely to be able to tolerate losses, unless you put in small amounts that you may not be able to make much money from unless you get lucky with a seriously successful stock. And you are more likely to appreciate dividends from your company, especially given Australia’s system of franking credits that minimise your tax liability. Not many stocks offer a very fine risk-reward balance and offer dividends…but a few do. And here are 5 of them.

CBA (ASX:CBA) 

There’s a big debate about whether or not CBA – Australia’s largest bank – is overvalued just because of its share price. Whether or not CBA is overvalued it keeps going up even with the bulk of analysts covering the bank expecting it to fall. And it keeps paying amongst the highest dividends per share of any company on the ASX. The latter fact is the key reason the bank makes our list of stocks for young investors.

But even if it is overvalued, the fact is that it is difficult to see a scenario causing a sharp downturn in its share price (i.e. >30%). So even if it doesn’t grow much further, this is a good ‘buy and hold forever stock’. After all, it was once said that if a job has been done properly when a stock is bought, the best time to sell is never.

BHP (ASX:BHP)

The resource sector is arguably the riskiest on the ASX, and arguably the least suitable for young investors. This is because the whole sector hinges on something beyond the control of any company. Namely, commodity prices. But some companies are less risky because they have exposure to multiple commodities, and BHP is one such company.

BHP’s key commodities are iron ore, metallurgical coal, and copper, accounting for 96% of revenues. It was exposed to oil and gas but sold its portfolio to Woodside (ASX:WPL) in 2022. While iron ore is currently the biggest money maker, BHP is looking to increase its exposure to coal, having bought the ASX’s former largest pureplay copper producer in Oz Minerals and fought tooth and nail to buy Anglo American (although it came up short). With copper demand set to double over the next 30 years, you can’t blame BHP for wanting more. And yes, BHP is a dividend stock paying an average of A$0.59 per quarter of late, representing a yield of over 5.6%.

Xero (ASX:XRO)

In years gone by, Xero would not have made this list of stocks for young investors to buy. But its progess in the last 12-24 months mean it has graduated to ‘blue chip’ status, in our view. This is because the company has become profitable, has broadened its range of services beyond accounting and has successfully expanded into international markets. It has become an essential service to its clientele.

And yet there is still more growth to come. The company is aiming to double its size in the next few years, claiming to have a TAM (Total Addressable Market) of NZ$100bn. Although Xero has not yet paid a dividend, we don’t think it will be too much longer before it does.

CSL (ASX:CSL)

Maybe young investors won’t get as rich as investors who bought the company at its 1994 privatisation and held for several years. Yet, CSL offers both stability and growth potential, making it ideal for young investors. The company is best known for its blood plasma and flu vaccine businesses, but has other products too and undertakes major R&D work to develop new products, particularly in kidney disease. It does not have the highest dividend yield, at just over 1%, by virtue of having a share price of over A$300 per share, although it is a reliable payer.

JB Hi-Fi (ASX:JBH)

While so many other retailers stagnated or declined during the cost of living crisis, this company went in the other direction. This 50-year old company is one of the largest sellers of consumer electronics and home appliances in Australia, with its namesake electronics stores and the Good Guys. Electronics are a good space to be in not just because people need them, but because (unlike furniture) they need to be replaced regularly. And with the Stage 3 tax cuts, we have a feeling that its struggling Good Guys segment may catch up. So this makes it a good stock for young investors to buy, offering stability and growth potential.

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