I’m always on the lookout for shares that will improve my portfolio’s diversification without worsening my returns. ‘Di-worsification’ by buying a share in the telco or resource sector simply because you don’t have any shares from that industry and worsening your returns isn’t a great idea. People seem to think that the best way to beat the market is by investing in individual shares. I agree with that line of thinking, but there are ways of beating the ASX index or global share market index by buying exchange-traded funds (ETFs) that focus on specific industries or geographical areas. I think…
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I’m always on the lookout for shares that will improve my portfolio’s diversification without worsening my returns. ‘Di-worsification’ by buying a share in the telco or resource sector simply because you don’t have any shares from that industry and worsening your returns isn’t a great idea.
People seem to think that the best way to beat the market is by investing in individual shares. I agree with that line of thinking, but there are ways of beating the ASX index or global share market index by buying exchange-traded funds (ETFs) that focus on specific industries or geographical areas.
I think the following three ETFs will improve my portfolio if, or when, I buy them:
BETANASDAQ ETF UNITS (ASX: NDQ)
I think most Aussie investors have far too little of their portfolio exposed to overseas shares, particularly the technology giants that are listed in the US.
Apple, Alphabet (Google), Netflix, Microsoft and Facebook are all (probably) daily parts of our lives. That type of ‘staying’ power is enormously valuable in the business world and I think these tech businesses are only going to become more powerful in time.
Facebook is working on virtual reality technology and could monetise Whatsapp and Facebook Messenger a lot better. Google has a long growth runway ahead with online video site Youtube, its other services and who knows how big an opportunity the automated car Waymo will be?
I cannot think of another group of blue chips with as much growth potential and I haven’t even mentioned Amazon. Now could be a decent time to buy the ETF after Facebook’s fall.
UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP)
This ETF owns shares of the 50 largest businesses in Asia that aren’t listed in Japan. Asia also has its own tech giants that are changing the way that people live their lives.
Tencent, Alibaba and Baidu are all economic powerhouses that are delivering enormous growth as Asia’s wealth increases and more people do more of their shopping on the internet. Tencent and Alibaba are each more than 10% of this ETF.
The growing Chinese middle class should create strong growth for all businesses like banks, insurance, travel and so on. That’s why this ETF could be such a strong performer over the coming years.
BetaShares Global Agriculture ETF (ASX: FOOD)
We all need to eat, right? The food industry could be described as defensive in some ways.
This ETF owns shares of some of the world’s largest food-related companies including Archer Daniels Midland, Deere & Co, Kubota and Tyson Foods.
Some food experts believe that the world may face a food shortage by 2030, meaning all food-related businesses may get a market-beating boost between now and then.
I think all Aussie investors need to increase their exposure to the US tech shares, whilst the Chinese businesses could be a once-in-a-lifetime growth story as long as the Chinese government doesn’t create any nasty surprises.
Another Australian businesses looking to profit from Asian growth is this hot ASX stock that’s opening its first locations in Asia this year.
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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.