Diversification is one of the key parts to an investment strategy. Mitigating risk whilst still attaining high investment returns is one of the best things you can do for your portfolio.
Being focused too much on one sector, such as banks, can be a problem. That's why I think the following three shares are good options for a strong portfolio:
DuluxGroup Limited (ASX: DLX)
DuluxGroup is one of Australia's largest home improvement brands. As the name suggests, it owns the Dulux paint brand. It also owns a number of other home brands including British Paints, Sellys, Cabot's, Yates and many more.
Brand power is one of the key things that can allow a business to continue to increase its prices – people are willing to pay for a brand. We are seeing Aldi and Amazon hurt a lot of other brands with their own branded products, but DuluxGroup seems to have a much stronger brand moat.
It's one of those slow-and-steady growth businesses that should be able to keep increasing profit regardless of market gyrations.
DuluxGroup is currently trading at 19x FY19's estimated earnings.
Greencross Limited (ASX: GXL)
Greencross is Australia's largest pet company with its Petbarn and Greencross chains. The company is growing all of its segments at a pleasing rate. Petbarn, online, vet and other categories like insurance are all growing.
The number of pets is increasing in Australia alongside the human population and the 'humanisation' of our furry friends means we're more willing to spend on toys, treats and expensive vet bills.
Greencross is currently trading at 12x FY19's estimated earnings.
Vanguard All-World ex-U.S. Shares Index ETF (ASX: VEU)
A shortcut to diversify a portfolio is through an index fund. This Vanguard exchange-traded fund (ETF) provides investors exposure to all of the biggest listed companies outside of the United States.
The US is not going to be the top economic power forever, Europe or Asia could be the next source of major winners. That's why this ETF could be a good investment with holdings like Samsung, Tencent and Nestle.
Foolish takeaway
I'd be happy to have all three shares and I already own Greencross shares. At the current prices I think Greencross is the clear winner because it's trading at such a low price/earnings ratio yet has a good path to more growth with its co-location strategy.
