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Where I’d invest $10,000 in a volatile 2020

The ASX has had a stronger start to the year than many may have predicted. The S&P/ASX 200 (INDEXASX: XJO) has pushed beyond 7,000 points and is currently up about 7% for the year, while the broader All Ordinaries (INDEXASX: XAO) is up around 6%. Anxieties around Brexit and the US–China trade war have largely eased over the last couple of months, providing some renewed strength to equities markets.

But the local devastation caused by the bushfires, as well as the global coronavirus outbreak and the uncertainty around the upcoming US presidential election, has proven that 2020 still has the potential to pose some unexpected challenges. In my view, the best approach to investing in times of uncertainty is to create a well-diversified portfolio favouring high-grade defensive companies, particularly those from the healthcare sector.

With this in mind, here are 4 ASX shares I would buy with $10,000 this year to best insure my portfolio against any unexpected downturns.

CSL Limited (ASX: CSL)

Investing in high quality healthcare companies is a good strategy in times of economic unrest and uncertainty because these companies’ revenues are often largely unaffected by downturns. For the overwhelming majority of cases, healthcare is not a discretionary spend. Healthcare companies can continue to turn a profit and benefit the community even when other sectors are collapsing.

Looking at the share price chart of biotech blue chip CSL proves this point. Over the last 12 months, its share price has been on a steady upward trajectory with barely a correction in sight. And the underlying business continues to grow – in its most recent results for the half year ended 31 December 2019, CSL reported net profit after tax of over $1.2 billion, an increase of 11% on the prior corresponding period (pcp) on a constant currency basis.

Cochlear Limited (ASX: COH)

Fellow healthcare giant Cochlear has shown itself to be more volatile than CSL over the last 12 months, but it has nonetheless still managed to post substantial gains, and over a longer timeframe it has delivered astronomical returns to its more loyal shareholders.

The Cochlear share price took a hit recently after it was forced to downgrade its FY20 earnings guidance due to the coronavirus outbreak in China. However, compare the 4% decline in Cochlear’s share price with the 18% crash the Blackmores Limited (ASX: BKL) share price suffered after it announced its own earnings downgrade last week. Despite the downgrades being triggered by the same event, Cochlear’s share price has held up surprisingly well as investors understand it has a more globally diversified customer base and demand for its hearing implant products is sticky.

ResMed Inc (ASX: RMD)

Another recent high-performing healthcare stock that would be a great investment for 2020 and beyond is ResMed. Company revenue for the December quarter was US$736.3 million, an increase of 14% on pcp on a constant currency basis. It also managed to expand its gross margin by 50 basis points, and increase its net income by 29%.

This strong financial performance has been reflected in its share price, which has almost doubled since April 2019. Demand for the company’s medical devices, which treat common respiratory illnesses like sleep apnoea, are expected to grow due to ageing populations in many more affluent Western countries.

BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

Ethical investing is gaining a lot of traction recently. Companies are increasingly trying to differentiate themselves based on their attitudes towards environmental, social and corporate governance (ESG) issues. And their share prices are being rewarded for it: this global ETF surged 30% higher in 2019.

Plus it feels good to know that your money is invested in companies with environmentally sustainable policies. The Betashares Global Sustainability ETF is a diversified portfolio of international companies that have been assessed by Betashares as engaging in ethical and sustainable business practices. An investment in this ETF gives you broad international exposure as well as allowing you to only back companies with strong ESG policies.

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Rhys Brock owns shares of Cochlear Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. 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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