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Diversify your portfolio with these 3 shares

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

I believe that diversification is important to achieve satisfactory returns in the short-term and the long-term.

Diversification doesn’t just mean spreading your money among Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and Telstra Corporation Ltd (ASX: TLS).

I think it’s important that investors spread their money across different industries and different businesses that have good growth prospects.

Here are three I think fit the bill:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

There are few exchange-traded funds (ETFs) that offer exciting levels of growth potential. BetaShares NASDAQ 100 ETF (ASX: NDQ) contains all the top US tech shares and the ETF I’ve mentioned offers exposure to all the Asian-based tech giants.

Baidu, Alibaba and Tencent are just three of the top names within this index. They are already leaders in the giant Chinese economy and are becoming dominant players in Asia, if not the world.

Many investors are saying this century will be the century of Asia and it’s obvious that technology is going to play a bigger and bigger role in people’s lives, which should mean the constituents of the ETF become very economically valuable over the long-term.

The current trade war between the China and US could represent a good time to start a position.

Duxton Water Ltd (ASX: D2O)

This company is supposedly unique compared to any other listed business in the world. Australia has an advanced water trading system where investors and farmers can trade water credits.

Duxton purely owns water entitlements and leases them to agricultural businesses. It hopes to profit over the long-term from lease income and growth of the value of the water credits.

It has benefited heavily in recent months due to the drought in regional areas, but water should grow in value over the long-term due to the increasing human population and food requirements.

WAM Microcap Limited (ASX: WMI)

WAM Microcap is a listed investment company (LIC) operated by the high-performing Wilson Asset Management (WAM). This LIC focuses on the smallest shares on the ASX, with market capitalisations under $300 million.

Few of us have enough exposure to small caps, which is a shame because they have the potential to generate the biggest returns because the issue of size and growth ceilings for large caps doesn’t affect small businesses.

Over the past year its portfolio has generated a return of 30.1% before fees and expenses.

Foolish takeaway

At the current valuations I’m interested in the ASIA ETF and I’m also interested in increasing my position of WAM Microcap.

Want some more quality ideas to diversify your portfolio? These top shares could all offer something different to the big banks and Telstra.

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Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO and WAM MICRO FPO. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of National Australia Bank 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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