Buy these 3 ETFs to give your portfolio diversification

Every investor knows the benefits of diversification, use these three ETFs to get it.

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Australian investors have a number of advantages over other share market investors. Franking credits and the capital gains discount are just two of the benefits.

However, diversification is harder to get right for Australian investors. Most Australian portfolios have far too much exposure to the big four banks.

Here are three alternatives instead:

BETANASDAQ ETF UNITS (ASX: NDQ)

This index has some of the biggest technology companies in the world as some of its constituents. Some of the top names include Facebook, Amazon, Apple, Microsoft and Alphabet (Google).

In a world of low inflation it's hard to find businesses that are growing at an impressive rate. All of the tech giants are still generating impressive organic growth, even after many years of growth already. Most of them trade cheaper than Australian tech companies too.

This index offers good diversification and truly global technology businesses. I will add this index to my portfolio at some point.

Vanguard All-World ex-U.S. Shares Index ETF (ASX: VEU)

This Vanguard index invests in several stock markets around the world except for the United States. This means it has some of the biggest and most promising companies in Europe and Asia as part of its holdings.

Some of its biggest stakes include Nestle, HSBC, Toyota, Royal Dutch Shell, Tencent and Samsung. I'd say most of those companies have promising futures and I'd be happy to own them. However, I think owning this index is a good way of getting exposure to all of them in one investment.

iShares S&P 500 ETF (ASX: IVV)

This index is a group of 500 businesses chosen by Standard & Poors for diversification and hopefully strong long-term performance.

It has been a great performer since the GFC due to the strong recovery of the American economy and the global growth achieved by some of the biggest names. Apple, Microsoft, Johnson & Johnson and Berkshire Hathaway are just a few of the winners that make up the S&P 500 index.

This index is a good way to get exposure to both the American and global economies because of how many regions most of the biggest businesses operate in.

Foolish takeaway

I think all three of these indexes would make great diversified additions to any Australian portfolio. Out of the three I think I'm most excited by the NASDAQ index because the FANG stocks are trading at reasonable value yet are still growing at a strong rate. The other two indexes are probably trading a bit too high considering the long-term outlook of rising interest rates.

Motley Fool contributor Tristan Harrison has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Bruce Jackson.

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