Buy these 3 stocks to instantly diversify your portfolio

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.

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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.

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