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:
UBS IQ Asia ETF (ASX: UBP)
The ongoing trade dispute between the US and China may be justified, on both sides, but it’s certainly having a negative effect on Asia-listed business valuations.
Although a long-term trade war could lead to a bad outcome for the Chinese economy, many Chinese businesses are mostly domestic-focused such as Tencent, Alibaba and JD.com.
This exchange-traded fund offers exposure to the 50 largest listed businesses in Asia (not just China). The region has been growing at a much quicker pace than western economies over the past decade and this is likely going to translate into more spending power for citizens and bigger market capitalisations of businesses.
Other than the tech giants I’ve already mentioned, some of the other larger holdings are: Taiwan Semiconductor, Baidu and China Mobile.
Over the past three years the ETF has delivered net returns of 15.5% per annum, which is good for a passive investment choice.
National Veterinary Care Ltd (ASX: NVL)
There are few things we hold more dear to our lives than our furry (or non-furry) pets. We will do what it takes to keep our pets safe, including taking them to a vet. Around three quarters of dogs and two thirds of cats go to the vet each year – this is a good defensive source of earnings for National Vet Care.
There could be a pleasing time ahead over the next few years for the company as it steadily increases its vet numbers through acquisitions. As long as the balance sheet remains strong it seems like the company could be fairly successful if it (at least) maintains profit margins and grows the number of veterinary clinics towards 150.
Management are predicting that revenue will grow by around 40% in FY19, which could result in a bumper year for the vet business.
Magellan Global Trust (ASX: MGG)
Magellan has a good track record of outperforming the market over the long-term, whilst holding a good amount of cash on hand.
Facebook, Alphabet (Google), Visa, MasterCard and Apple all have excellent long-term growth potential and market positions and are some of its top holdings. I am fairly certain the tech giants will continue to outperform the global share market average return over the next five years, assuming they are not broken up.
Magellan Global Trust is invested in all of these top businesses and has outperformed the MSCI World Net Total Return Index (AUD) since inception a year ago by 1.2% after all fees.
Owning individual international shares yourself can be expensive and add complexity, Magellan Global Trust could be the best way to get overseas exposure without leaving the ASX.
At the current prices I believe all three are good value.
Asian shares look quite cheap at the moment, US tech shares have recently been hit in the recent crash and National Vet Care’s price is materially lower than it was six months and twelve months ago, despite being a bigger business.
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Motley Fool contributor Tristan Harrison owns shares of MAGLOBTRST UNITS and NATVETCARE FPO. The Motley Fool Australia owns shares of NATVETCARE FPO. 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.