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:
Reece Ltd (ASX: REH)
Reece is a blue-chip name but it isn't a widely held business. But, I think it ticks lots of investment criteria boxes.
Management are long-term focused, Reece is now on the third generation of the Wilson family management. They are major shareholders in the business, so they're very aligned with regular investors.
It has diversified its earnings in recent years so that it's now a leader in all types of piping including civil works and irrigation. It's also a large player in the HVAC space.
Reece's US acquisition opens a large door of opportunity for long-term profit growth. In time, it could prove to be a shrewd move.
BWX Limited (ASX: BWX)
BWX is the owner of several natural beauty brands. The last year or so has been brutal for BWX shareholders, but it may now be turning a corner.
The failed acquisition took up a lot of management's time and there were plenty of related costs too. However, now management can focus on growing the portfolio of brands it owns.
If BWX can keep growing revenue from each of its brands and improve the profit margins then it could be a long-term buy trading at only 12x FY19's estimated earnings. Time will tell whether the analyst estimates are right or not.
Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE)
I think a good combination for investors is the low cost of Vanguard ETFs combined with growth potential.
I think Asia offers Australian investors exposure to a large region of the world's population that's growing wealth quickly. You can't get the same level of Asian exposure with ASX or US shares.
With some leading e-commerce businesses like Tencent and Alibaba among this index's top holdings, you are getting good growth. All Asian industries should benefit over time from the wealth creation such as telcos, banks and insurance businesses.
Foolish takeaway
With the latest market volatility I'm inclined to go for the Vanguard Asian ETF as it offers excellent diversification to our regular investments and it's trading cheaply for the earnings growth generated.
