Achieving proper diversification in your ASX share portfolio can take a lot of time and money. We Fools think that in order to hit a beneficial level of diversification, an ASX share portfolio should have at least 12–15 individual companies within it. That can be an off-putting amount of capital for a new investor to reach for. Luckily, you can always use the exchange-traded fund (ETF) shortcut if you want to quickly bump up your portfolio's diversification.
ETFs work well for this purpose because an ETF at its core already holds a basket of individual shares. Thus, one extra investment can add dozens, hundreds or even thousands of different companies indirectly to your portfolio. So, below are 2 ASX ETFs that I think would work well for this purpose. Because, to paraphrase a certain surfing film, if you want to achieve the ultimate level of diversification, you don't have to pay the ultimate price.
2 ASX ETFS for portfolio diversification
1) BetaShares Asia Technology Tigers ETF (ASX: ASIA)
This ETF is a great pick in my view because it holds 50 companies from the Asian region, including China, Korea, and India. Asia is an area that most ASX investors have little exposure to, so I think this ETF is a great remedy for that. ASIA doesn't just hold any company though, it only selects those businesses that are at the forefront of technology in the region. Some of its top holdings include Alibaba Group, Tencent Holdings and JD.com — all massive e-commerce businesses in China. This ETF charges a management fee of 0.67% per annum and has returned an average of 27.77% per annum since its inception in 2018.
2) iShares Global Consumer Staples ETF (ASX: IXI)
This ETF is a whole different kettle of fish in that it eschews technology in favour of the companies that make consumer staples goods. Consumer staples are everyday needs that most of us can't really go without. Think foods, drinks, household essentials and cleaning products. Vices like alcohol and tobacco are also included. So it makes sense that some of IXI's major holdings include Nestle, Procter & Gamble, Walmart, Coca-Cola and Altria as well as almost 100 other holdings. These companies are typically very resilient and defensive shares to own, and thus I think this ETF is a great option for portfolio diversification in today's uncertain times. IXI charges a management fee of 0.47% per annum and has returned an average of 11.84% per annum over the past 10 years.
Foolish takeaway
If you're worried about your portfolio not being adequately diversified, then I think these 2 ETFs are a great shortcut solution. Both have reasonable long-term prospects as investments and, in my view, can lend extra diversification to any ASX portfolio today.
