Getting diversification right for your portfolio is one of the best ways to deliver strong returns. Diversification can mean spreading your investments across industries and geographies.
It’s a good idea to expand your portfolio into companies that operate in different industries. If you invest like everyone else, then you’ll get similar results.
Here are three shares that I think would help diversify a portfolio:
Future Generation Global Investment Co Ltd (ASX: FGG)
I think most Australian investors need to diversify their investments away from Australia. A lot of the Australian share market risks relate to either Australian property or China. I think it’s better to get away from those two areas.
This is a listed investment company (LIC) that invests in Australia’s top funds that focus on overseas shares, such as Magellan Financial Group Ltd (ASX: MFG).
There are no management fees or performance fees, instead 1% of NTA is donated to charities focused on youth mental health – a great cause. Yet it’s also been a strong performer recently, its portfolio has grown by 25.7% over the past year before donations and taxes.
Tassal Group Limited (ASX: TGR)
Tassal is Australia’s largest fish business with large salmon farm operations, a wholesale fish business and it recently acquired some major prawn assets for $31.9 million. Management believe there are significant synergies between the prawn assets and the wholesale business De Costi. There integration risks though.
I have been impressed by Tassal’s consistent operating profit and dividend growth steadily over the years. It could continue to grow as Asian exports and changing Australian diets drive further demand for salmon.
It’s currently trading at 14x FY19’s estimated earnings with a grossed-up dividend yield of 5.1%.
Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE)
Vanguard has truly been a market-changing disruptor, sending the prices of management fees down and giving people access to market average returns for a very low price.
I like that Vanguard also offers exchange-traded funds (ETF) that give a specific focus on a certain region or asset class. For example, the above-mentioned ETF gives exposure to shares listed in the Asian region, outside of Japan.
There are some very attractive growth shares listed in Asia such as Tencent and Alibaba. These are technology giants that are already dominating in China and could soon dominate the whole of the Asian e-commerce industry in many countries.
These three shares would offer something quite different to what’s in most other Australian portfolios. I’m particularly attracted to the Vanguard Asian ETF as hardly any of my portfolio is exposed to Asia, yet it’s the continent that’s growing the most in the long-term.
Another way to diversify your portfolio would be with this top ASX share that’s a leader in the auto industry.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.