I think that maintaining a truly diversified portfolio is one of the most important things for investors to consider.
You only need to look at what has happened to the travel sector during the coronavirus crisis to see why.
The likes of Flight Centre Travel Group Ltd (ASX: FLT), Sydney Airport Holdings Pty Ltd (ASX: SYD) and Webjet Limited (ASX: WEB) have all been crushed over the last two months for no fault of their own.
This means that if your portfolio had too much exposure to the sector it would have been hit far harder than the market average.
With that in mind, here are three options to consider diversifying your portfolio with:
BetaShares NASDAQ 100 ETF (ASX: NDQ)
The first option for investors to consider for diversification is the BetaShares NASDAQ 100 ETF. As its name implies, this exchange traded fund gives investors exposure to 100 high quality companies listed on the technology-focused NASDAQ index. This means investors will be buying a slice of major tech giants such as Amazon, Apple, Alphabet, Facebook, and Microsoft. I think this could be a good way for investors to gain exposure to the tech sector without picking individual shares.
If you don’t have exposure to the mining sector, then BHP could be the way to do it. I think it is the best option in the industry and well-placed to deliver strong total returns for investors over the coming years. This is thanks to its low cost and diverse operations and the high levels of free cash flow they are generating. And given the strength of its balance sheet, I suspect management will return the majority of its cash flow to shareholders through dividends.
Vanguard MSCI Index International Shares ETF (ASX: VGS)
Another exchange traded fund to consider for diversification is the Vanguard MSCI Index International Shares ETF. This exchange traded fund provides investors with low-cost exposure to many of the world’s leading companies. This allows investors to participate in the recovery of the global economy from the pandemic, rather than just the ANZ market. Amongst its top holdings you will find the likes of Amazon, Microsoft, Nestle, and Visa.
Where to invest $1,000 right now
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*Returns as of June 30th
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited, Sydney Airport Holdings Limited, and Vanguard MSCI Index International Shares ETF. 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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