MENU

Buy these 3 stocks to instantly diversify your portfolio

Don't put all your eggs in one basket...

Australia is one of the richest countries in the world. However, diversification is not utilised by a lot of Australian investors. Most people have a lot of their wealth tied up in one or a handful of properties plus bank shares. Arguably, the bank shares are also heavily linked to the property market.

Therefore, I think it’s very important for every investor to diversify away from these two areas.

Here are three ideas to do that:

iShares S&P 500 ETF (ASX: IVV)

This exchange-traded fund gives investors exposure to the S&P 500, which is one of the most diverse and successful indexes in the world. In its top holdings it has Apple, Microsoft, Amazon, Facebook, Alphabet (Google), JPMorgan Chase, Berkshire Hathaway, Johnson & Johnson and Exxon Mobil.

The S&P 500 has steadily become more tech-focused over the years but that’s how the world is changing. That’s why it’s such a good index because its holdings change to fit the world we live in.

This ETF has a very low management fee of 0.04% per annum and is offered by Blackrock, one of the biggest fund managers in the world.

Challenger Ltd (ASX: CGF)

Challenger is the clear annuity provider for Australians looking for a secure source of income from their capital.

The number of Australians over the age of 65, which is retirement age, is expected to increase by 75% over the next 20 years. This should lead to a large increase in demand for annuities and a good increase in management fees for Challenger.

It’s also a good sign that Challenger is working with Japanese providers to offer products, it creates another source of growth for the annuity company.

Challenger is currently trading at 15x FY19’s estimated earnings.

Apiam Animal Health Ltd (ASX: AHX)

Apiam is a small cap that describes itself as Australia’s leading rural veterinary practice. It provides expert vets that can help pigs, cattle, sheep, horses as well as cats and dogs. This could be a good idea alone because Australia is building up its agriculture sector with more farm exports.

However, Apiam also recently announced that it would be working with PETstock to co-locate vets inside regional PETstocks such as a Bendigo location. This gives it two good sources of growth.

Apiam is trading at around 19x FY18’s estimated earnings.

Foolish takeaway

All three would be really good ways to diversify a portfolio. I think the S&P 500 could be a bit expensive to buy today, but Challenger is a good large cap option and Apiam could be a good small cap option.

An even better idea to diversify a portfolio could be this top stock which operates in the auto industry, I'm excited by it - that's why it's in my portfolio.

OUR #1 dividend pick to grow your wealth over the new financial year is revealed for FREE here!

Financial year 2018 is here and The Motley Fool's dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor Tristan Harrison owns shares of Challenger Limited. The Motley Fool Australia owns shares of and has recommended Challenger 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.

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.