Here’s how to diversify your portfolio

I’m always on the lookout for ways to diversify my portfolio whilst maintaining strong returns. If you can mitigate risk whilst also beating the Aussie market then that’s a powerful combination.

Diversification usually means investing into different industries and perhaps businesses that offer geographical diversification away from Australia.

Here are three shares that I think would offer good diversification:

TPG Telecom Ltd (ASX: TPM)

TPG is one of Australia’s largest telecommunication companies. It not only has its value-brand TPG to sell to customers, but it also owns the iiNet brand too, which has a reputation of better quality and customer service.

I think TPG is a much better option than Telstra Corporation Ltd (ASX: TLS) because it offers growth to investors. It has plans to build mobile networks in Singapore and Australia. I think this is key because 5G could replace fixed wired broadband connections for a lot of households. TPG may come to the market with very cheap mobile offerings, one expert recently said TPG could be Amazon-like with its mobile offering.

TPG is currently trading at 18x FY19’s estimated earnings.

Japara Healthcare Ltd (ASX: JHC)

Japara is one of Australia’s largest aged care providers. The number of people who need to go to an aged care home is predicted to dramatically increase as Australia’s ageing demographics plays out.

The company is building its presence throughout the country with brownfield and greenfield expansion. The company is also acquiring small competitors to grow such as the recent Riviera Health purchase which adds 507 bed licenses to Japara’s total.

Japara is currently trading at 18x FY17’s earnings.

Vanguard US Total Market Shares Index ETF (ASX: VTS)

Many Aussie investors probably don’t have enough exposure to the American share markets, which happens to be the home of most of the world’s global companies.

This Vanguard index fund offers investors exposure to the biggest shares in the US like Apple, Facebook, Berkshire Hathaway and Microsoft.

This ETF has a very low management fee of 0.04%, which is one of the lowest in the world.

Foolish takeaway

I’d be happy to buy all three shares at the current prices, though I’d personally lean towards Japara because it also comes with a very large fully franked dividend.

Want even more diversification ideas? Try this top stock which I own in my portfolio, it should get a boost if a recession happens.

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Motley Fool contributor Tristan Harrison owns shares of JAPARA DEF SET. The Motley Fool Australia owns shares of and has recommended Telstra Limited and TPG Telecom 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 Scott Phillips.

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