I think diversification is important when investing in ASX shares.
You don’t want too many of your eggs in one basket in the current COVID-19 situation that the world is in.
It’s hard to predict what’s going to happen over the next 12 months. Vaccine success could send the share market higher. Shares could also fall if a healthcare solution isn’t produced, if COVID-19 infections spread or if the economic impacts are worse than expected.
With the above uncertainty, I think it’s a good idea to make sure your portfolio is diversified with good shares. There’s not much point diversifying just for the sake of it if your returns are hampered.
Here are three ASX share ideas to quickly add diversification:
BetaShares Global Quality Leaders ETF (ASX: QLTY)
This is an exchange-traded fund (ETF) which is offered by BetaShares, one of the biggest ETF providers in Australia.
There are some global ETFs that offer exposure to many hundreds or even thousands of businesses. This ETF offers diversification with investments in 150 global businesses ranked as high-quality companies.
They need to rank well with a high return on equity (ROE) and profitability, low leverage and earnings stability.
The largest positions only have a weighting of around 2%, so it’s not too exposed to any particular business. I think most Aussie investors need to get more exposure to global shares, not ASX shares. The ETF’s biggest positions are: Adobe, Accenture, Apple, Nvidia, Cisco Systems, Intuit, L’Oreal, Vertex Pharmaceuticals, UnitedHealth and Nike.
Quality tends to shine through difficult periods and over the long-term. Since inception in November 2018, the ETF has delivered an average return per annum of 19.76% per annum after fees.
The current annual cost is 0.35% per annum, which is pretty cheap.
Future Generation Global Invstmnt Co Ltd (ASX: FGG)
I really like to buy shares for cheaper than they’re worth. Future Generation Global is a listed investment company (LIC). As the name suggests, it’s not invested in ASX shares – it invests in global shares.
But it doesn’t directly invest in shares, it’s invested in the funds of fund managers who invest in international shares. But those fund managers work for free so that Future Generation Global can donate 1% of its net assets per annum to youth mental health charities.
Some of the fund managers it has investments with include Magellan Financial Group Ltd (ASX: MFG), Cooper, Marsico, Caledonia and Munro Partners.
Looking at the gross investment portfolio performance of the LIC, it has outperformed the MSCI AC World Index (AUD) over the past six months, 12 months, three years and since inception in September 2015.
Aside from the outperformance and diversification, another reason to like the LIC is that’s trading at an attractive discount to its net tangible assets (NTA). At the end of June 2020 it had pre-tax NTA per share of almost $1.47. The current Future Generation Global share price is trading at a 17% discount to the June 2020 NTA.
Infratil Ltd (ASX: IFT)
Infratil is a New Zealand based business that is invested in a variety of sectors across Australia and New Zealand.
The ASX share owns 66% of Wellington Airport. Infratil owns almost half of a data centre business, it owns half of Vodafone New Zealand, it’s involved in various renewable energy projects, it owns a diverse commercial real estate portfolio, it owns half of RetireAustralia – which is the largest privately-held pure-play retirement operator in Australia – and it’s involved with Australian Social Infrastructure Partners.
Each of the above investments are long-term ideas which could produce solid total returns for Infratil.
I think Infratil is a good bet for the long-term growth of the economies in New Zealand and Australia.
At the current Infratil share price it offers a dividend yield of 3.4%.
Where to invest $1,000 right now
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.