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3 smart ways to stabilise your portfolio

The sharemarket can be a bumpy, and sometimes even scary way of growing your wealth.

Stocks aren’t like term deposits or government bonds where there are virtually no risks involved. While Australian equities have historically delivered superior returns to other investment classes, there have certainly been countless bumps along the way.

Just look at the Australian stockmarket during the Global Financial Crisis. After peaking above 6,850 points, the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) index crashed and even threatened to fall below 3,000 points just over a year later. That’s a drop of more than 50%.

Although that sort of volatility is rare, the fact remains that if you can’t accept the possibility of losing a lot of money, then the sharemarket just isn’t for you.

But investors really don’t need to take an all-or-nothing approach. There are a number of stocks you can buy that can help stabilise your portfolio in times of higher volatility (or indeed, in the event of another market crash). Here are three of those stocks which you could consider buying today…

  1. Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is an investment conglomerate which boasts a very similar business model to that of US giant Berkshire Hathaway. With interests spanning over several different industries, including telecommunications, construction and resources, Soul Patts is a very safe bet for the long term.
  2. Westfield Corp (ASX: WFD) was recently created out of the Westfield Group restructure. While Westfield has not always been a low volatility stock (Westfield Group dropped heavily during the GFC), the shopping centre giant has been heavily focused on strengthening its balance sheet and divesting non-core assets. With heavy exposure to the recovering US and UK economies, Westfield Corp could be a great pick-up today.
  3. BHP Billiton Limited (ASX: BHP) is the world’s largest miner. The inclusion of BHP on this list might surprise some investors, given that it is leveraged to fluctuating commodity prices like iron ore and coal. However, its sheer size and low-cost base make it an appealing prospect. As it increases production, its margins will continue to improve while lower commodity prices will force other miners out of the market.

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Motley Fool contributor Ryan Newman owns shares in Washington H. Soul Pattinson and Berkshire Hathaway.

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