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 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:
BETANASDAQ ETF UNITS (ASX: NDQ)
This exchange-traded fund (ETF) gives investors exposure to 100 of the best technology businesses in the world listed on the NASDAQ in the US.
I’m talking about shares that we use in everyday life like Apple, Facebook, Microsoft and Alphabet (Google). All of the ones I named are trading at reasonable forward estimates and could continue to take a larger share of their respective focused industries like advertising.
Future Generation Global Investment Co Ltd (ASX: FGG)
This company invests in a range of leading Australian fund managers’ funds that invest in international shares such as Magellan Financial Group Ltd (ASX: MFG).
This approach gives shareholders a very diverse portfolio to global shares.
The company doesn’t charge management fees or performance fees, instead it annually donates 1% of its NTA to mental health charities, which is a wonderful cause.
UBS IQ Asia ETF (ASX: UBP)
I think Australian investors are starting to get the idea that investing in international shares is a good idea. But, they’re missing what is perhaps the best growth region: Asia. Particularly China.
Most of this ETF’s holdings are listed in either China, Taiwan or Hong Kong. Tencent, with Wechat, is the market-leader in terms of mobile phone usage whilst Alibaba is a huge e-commerce business. I’m sure readers are very familiar with the third largest holding in the ETF, Samsung, which is like Asia’s version of Apple. Some experts have predicted that Tencent will become the largest business in the world over the next decade.
Just owning the above three shares would give your portfolio excellent diversification and would hopefully beat the MSCI World Index. At the current prices I would be tempted to go for the UBS ETF because the Trump tariffs have caused the Asian share prices to fall somewhat.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. 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.