I think it’s a good idea to have diversification in your portfolio. Some ASX shares can provide excellent diversification very quickly.
There are some high-quality ASX shares out there like A2 Milk Company Ltd (ASX: A2M) and Pushpay Holdings Ltd (ASX: PPH). However, there are individual company risks when you own relatively few names in your portfolio. So it could be an idea to buy ASX shares that offer instant diversification rather than buying additional individual businesses just to make up the numbers.
Here are some great ideas:
Vanguard Diversified High Growth Index ETF (ASX: VDHG)
This is a very diversified option for investors. It’s an exchange-traded fund (ETF) that invests in a number of other ETFs. It’s invested in ASX shares, international shares, global bonds, small international companies, emerging markets and Australian bonds.
It would be possible for this investment to be your only investment forever. It offers exposure to both growth assets and defensive assets.
The bonds may not be the best asset to own right now because interest rates are so low, so they don’t offer much of a return.
However, the ETF has enough growth exposure that it could deliver good total growth. Since inception in November 2017 its net returns have been 6.6% per annum.
The ETF comes with an annual management fee of 0.27% per annum. That’s cheap for what it does in my opinion.
Future Generation Global Invstmnt Co Ltd (ASX: FGG)
Future Generation Global is a listed investment company (LIC) which invests in indirectly in global shares.
The ASX share invests into the funds of Australian fund managers that invest in global shares. The great thing is that there are no management fees charged by Future Generation Global or the underlying fund managers, they work for free. They do this so that Future Generation Global can donate 1% of its net assets each year to youth mental health charities.
The LIC has money invested with a variety of managers including outfits like Magellan Financial Group Ltd (ASX: MFG), Cooper and Munro Partners.
The ASX share has outperformed its benchmark (the MSCI AC World Index (AUD)) over the past month, six months, 12 months three years and since inception (in September 2015). Over the past three years the Future Generation Global gross portfolio return has delivered a return of 13.1% per annum, outperforming its benchmark by 2.1%.
At the current Future Generation Global share price it’s trading at a 14% discount to the net tangible assets (NTA) per share at 14%. Buying outperformance at a discount is attractive to me, particularly during the current COVID-19 times.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is a reliable investment conglomerate ASX share.
It’s invested in private businesses in industries like agriculture, swimming schools, resources and financial services.
Soul Patts is also invested in listed ASX shares such as TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Australian Pharmaceutical Industries Ltd (ASX: API), Milton Corporation Limited (ASX: MLT), Bki Investment Co Ltd (ASX: BKI) and Clover Corporation Limited (ASX: CLV).
I like the mix of large holdings above, plus it also has a large cap portfolio and small cap portfolio within its asset base.
Not only does Soul Patts regularly deliver outperformance of the broad ASX, but it is increasing its diversification. It has plans to invest in regional data centres.
The investment house has been around since 1903. It has great longevity. The management team are involved in the business for the long-term and investing within Soul Patts itself for the long-term.
At the current Soul Patts share price, it offers a grossed-up dividend yield of 4.1%.
I really like each of these ASX shares as long-term diversification options. I like Soul Patts as a long-term idea, but Future Generation Global looks very good value to me. It’s also good to buy now because of the strength of the Australian dollar.