Diversification is one of the key parts to an investment strategy with ASX shares. Mitigating risk whilst still attaining high investment returns is one of the best things you can do for your portfolio.
Being focused too much on one sector, such as banks, can be a problem. That's why I think the following three shares are good options for a strong portfolio:
Citadel Group Ltd (ASX: CGL)
Citadel is a technology business that provides secure management software for clients in various industries.
For example, it serves defence, security, education and the health industries. Evolution is a piece of software that has been used in health laboratories for over 30 years. Other Citadel offerings include anaesthetic billing software and oncology information management.
In FY18 Citadel grew earnings per share by 35.4% and grew the total dividend by 7.8%. This was impressive and there could be more profit to come with more contract wins and good recurring revenue from its existing contracts.
It's currently trading at only 24x FY18's earnings.
PM Capital Global Opportunities Fund Ltd (ASX: PGF)
I think most Aussie investors need to increase their exposure to international shares. The ASX only makes up 2% of the global share market.
One of the ways to get that diversification could be with a listed investment company (LIC) that invests in overseas shares such as PM Capital Global Opportunities.
It's invested in shares in North America, Europe, Asia (not including Japan) and the UK. It invests all over the world. Since inception in December 2013 it has generated a return of 11.3% per annum after fees and expenses.
It has increased its dividend each year since March 2016 and currently offers a grossed-up dividend yield of 4.3%.
Challenger Ltd (ASX: CGF)
If I had to choose one financial business on the ASX to invest in it would be Challenger. It primarily sells annuities to retirees who are looking for a secure source of earnings from their capital. I think it's more defensive than banks.
Demand for annuities is projected to grow for a long time because the number of over-65s is expected to grow by 40% over the next decade. More retirees should equal more clients.
New government rules will make annuities seem even more attractive to retirees.
Challenger is currently trading at 14x FY19's estimated earnings.
Foolish takeaway
All three shares should be able to beat the ASX index return over the long-term due to where they're focused. At the current prices both Challenger and Citadel look like good value growth shares. I am looking to add more Challenger shares to my portfolio at the current price.
