Who else wants to diversify their portfolio?

I think it’s more important than ever to diversify your portfolio away from the banking sector and the big end of the share market. I think those largest stocks are actually some of the riskier choices these days because they may not grow over the next few years.

Instead, I think investors should look further down the list of market caps and identify some of the businesses that will grow no matter what economic conditions are happening.

Here are three shares to diversify your portfolio:

REA Group Limited (ASX: REA)

Many investors think the only way to get exposure to the residential property market is to invest in an actual property. However, I think REA Group is a much better option.

With negative gearing and rental cash losses prevalent, the only way for property investors to make any money is with house price growth. REA Group can grow its price per advertisement, but it can also grow revenue if more properties are listed and how long they are listed on the site.

REA Group is currently trading at 36x FY18’s estimated earnings with a grossed-up dividend yield of 1.7%.

Sydney Airport Holdings Ltd (ASX: SYD)

Sydney Airport could be one of the best stocks to benefit from the tourism boom in Australia. In its November 2017 update it revealed that international passengers had grown by 7.1% compared to November 2016.

The growth in passengers means passenger fees, car park fees, airport retail fees and various other revenue streams should increase.

Sydney Airport is currently trading at 38x FY18’s estimated earnings with an unfranked dividend yield of 4.97%.

National Veterinary Care Ltd (ASX: NVL)

National Vet Care is one of my favourite small cap growth stocks. It’s a veterinary clinic operator that is steadily adding more clinics to its network to improve its margins and grow profit.

Just last month management announced that the business would be acquiring a further four clinics which should add a total of $4.5 million revenue and $0.79 million earnings before interest and tax (EBIT) to a full-year result.

National Vet Care is currently trading at 35x FY17’s earnings with a grossed-up dividend yield of 1.47%.

Foolish takeaway

The share market is quite expensive at the moment and these three shares are no exception. At the current prices I’d only be willing to buy National Vet Care shares because I believe it will grow profit by a lot over the next few years.

Other shares I'd be happy to buy today are these hot stocks.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison owns shares of NATVETCARE FPO. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. The Motley Fool Australia owns shares of NATVETCARE FPO. The Motley Fool Australia has recommended REA Group Limited. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.