The coronavirus crash the ASX has gone through in 2020 has, so far, proved many things. But one of the most pertinent (in my view) is the importance of having a diversified and risk-adjusted portfolio.
A portfolio of ASX shares is always open to attack from so-called ‘black swan’ events; occurrences (like the coronavirus) which no-one can predict or plan for. For example, having a portfolio with large exposure to travel-related shares might not have raised too many eyebrows in 2019. But in 2020? It’s a different story.
So here are 3 ASX shares that I think anyone can add to their portfolio and instantly see increased diversification and a debasing of concentrated risk.
MFF Capital Investments Ltd (ASX: MFF)
MFF Capital is a Listed Investment Company (LIC) that holds a portfolio of predominantly US-based shares. Some of these include MasterCard, Visa, Home Depot, Wells Fargo, and Microsoft, but overall MFF holds around 20 companies.
Just by buying shares of MFF, you are getting exposure to this diversified portfolio of US shares – something that will instantly increase your own portfolio’s diversification. Most ASX share portfolios are underweight in US and international shares as well, so this company is an easy way to increase your geographical exposure.
Washington H. Soul Pattinson & Co Ltd (ASX: SOL)
‘Soul Patts’ is one of the best shares on the ASX in my view. The company is very old, having listed on the (then) Sydney Stock Exchange back in 1903 as a chemist. Today, Soul Patts has well and truly branched out from pharmacies and now owns significant chunks of a variety of quality ASX businesses. These include TPG Telecom Ltd (ASX: TPM), Brickworks Ltd (ASX: BKW), BKI Investment Company Ltd (ASX: BKI), and New Hope Corporation Ltd (ASX: NHC).
Thus, I think Soul Patts is a great company to hold for broad exposure to the Australian economy. It might also be a strong alternative to an S&P/ASX 200 Index (ASX: XJO)-based ETF for any investor not keen on heavy exposure to ASX banks and miners.
iShares Global 100 ETF (ASX: IOO)
This ETF holds nothing more or less than the 100 largest companies within the advanced economies of the world. It’s dominated by US shares like Apple, Alphabet, and Amazon, but also has companies like Toyota, Nestle, and Samsung to spice things up.
All of the companies in iShares Global have got to where they are today by being highly successful in their fields. Whilst large companies do fail, I still think that size gives a lot of safety, especially in these uncertain times. As a result, I don’t think any investor can go wrong by including this ETF in a well-balanced portfolio.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Magellan Flagship Fund Ltd, Mastercard, Visa, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Mastercard, Microsoft, and Visa and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Mastercard. 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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