Everyone knows that holding a wide range of companies in a share portfolio helps mitigate risk.
But it can also help you avoid doing things you'll regret. Like selling good companies once they've fallen because you're worried you got the investment thesis wrong, when really it was just a market correction.
It also enables you to expand your circle of competence. By challenging you to try and learn new things.
Here's five stocks to help you diversify your portfolio this New Year…
1. Defensive
Computershare Limited (ASX: CPU) is a great defensive business. Its primary operations are in share registry services (i.e. connecting shareholders to their respective companies) but it also handles dividend payments, voting, M&A advisory and more. Operating in more than 20 countries, it has sticky revenues and a wide and growing competitive advantage.
2. Cyclical
Macquarie Group Ltd (ASX: MQG) is Australia's leading investment bank. It derives 65% of income from overseas markets. Despite a recent push in 'annuity style' businesses like mortgages and funds management, Macquarie's capital markets facing businesses are cyclical in nature. When global markets are firing on all cylinders, Macquarie tends to do really well. In coming years, analysts are expecting solid earnings and dividends per share growth.
3. Technology
Carsales.Com Ltd (ASX: CRZ) is already the leading automotive listing website locally but through strategic investments it is also looking to grow overseas. Particularly in emerging markets throughout Asia and South America where it sees real opportunity to disrupt incumbents and forge another leading position.
4. Growth
Slater & Gordon Limited (ASX: SGH) is Australia's leading personal injury law firm which is currently expanding throughout the UK. In addition it has also identified general law as a key growth area in the local market, which will help it to improve its scale as its captures more market share with both organic and acquisitive growth strategies.
5. Income
Scentre Group Ltd (ASX: SCG) is the owner of Westfield shopping centres in Australia and New Zealand. Scentre Group was only recently formed from a spin off of Westfield Corp and Westfield Retail Trust, yet has performed strongly since listing. At today's prices it's offering a 5.5% unfranked dividend.
