In addition to being diversified across a number of different asset classes (fixed interest, property, cash etc.), investors should make sure their individual positions within those asset classes are not over-exposed to the market's frequent mood swings.
For example, in your portfolio, it's important to not be over-exposed to any one stock or industry group.
Having exposure to infrastructure, technology, financials and services sectors is not only a good way to diversify risk, but to also expand your potential for market-beating returns.
Your instant five share diversified portfolio
- Services: Computershare Limited (ASX: CPU) is a leading share registry business which is diversified across many markets. Not only is Computershare directly leveraged to increasing interest rates, it's tipped to pay a 2.4% partially franked dividend in the next year.
- Telecommunications: M2 Group Ltd (ASX: MTU) is a retailer of utilities. The owner of Dodo, Primus and Eftel telecommunications brands has recently pushed into the energy, gas and insurance space. In addition to organic growth and a 2.6% dividend, its decision to acquire New Zealand's Call Plus Group earlier this week tells investors its successful acquisitive growth strategy is still alive and well.
- Infrastructure: Transurban Group (ASX: TCL) is a toll road owner and operator with assets spread throughout Australia and the United States. The company has an enviable cash flow position and a wide competitive advantage. As it continues to grow its toll revenues by increasing prices or upgrading motorways, its 3.8% dividend is also likely to increase.
- Technology: XERO FPO NZ (ASX: XRO) is a dynamic cloud-accounting software developer out of New Zealand. Although it's not yet profitable, its rapidly expanding customer base and scale mean its first profit could come sooner rather than later.
- Property: Servcorp Limited (ASX: SRV) is not your everyday property play. It provides serviced and virtual offices and IT services in cities throughout the world. Like many property stocks, Servcorp's earnings are cyclical. Its shares currently offer a trailing dividend yield of 3.2%.
Should you buy these shares now?
At today's prices Xero, M2 Group and Computershare appear to hold compelling long-term value for investors. However, I'm holding-off buying shares of Servcorp and Transurban Group until we're afforded an opportunity to buy at a more compelling valuation point.
