One of the biggest mistakes new investors make is putting all their eggs in one basket. A single stock or sector might do well for a while, but when conditions turn, portfolios can quickly suffer. The good news is that diversification doesn't have to be complicated or expensive.
In fact, with just three exchange-traded funds (ETFs) listed on the ASX, you can create a globally diversified portfolio built to last for decades. Here's how.
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Cover your Australian core
For most investors, it makes sense to start with some exposure to the Australian market. The Vanguard Australian Shares Index ETF (ASX: VAS) is a simple way to do this, tracking the ASX 300 index. That means you're instantly invested in the country's biggest companies, including BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and Woolworths Group Ltd (ASX: WOW).
Australian shares also offer the unique benefit of franking credits, which can make dividends more attractive compared to global counterparts.
Add international blue chips
Australia accounts for less than 2% of the global share market, so it is essential to diversify overseas. The iShares S&P 500 ETF (ASX: IVV) gives you exposure to the 500 largest companies in the United States. That means ownership of world-leading businesses like Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Walmart (NYSE: WMT).
By adding the iShares S&P 500 ETF, you capture the long-term growth of the world's largest economy and its most innovative companies.
Tilt toward quality growth
To round out the portfolio, it's worth adding an ETF that tilts toward high-quality growth businesses globally. The Betashares Global Quality Leaders ETF (ASX: QLTY) fits the bill. It screens for companies with strong profitability, low debt, and stable earnings. Its portfolio includes global leaders such as Nestle (SWX: NESN), Roche Holding (SWX: ROG), and Visa (NYSE: V).
This quality focus helps reduce risk while still capturing the growth of global markets. This ASX ETF was recently named as one to consider by the team at Betashares.
Foolish takeaway
By combining the Vanguard Australian Shares Index ETF, the iShares S&P 500 ETF, and the Betashares Global Quality Leaders ETF, investors can create a diversified portfolio with exposure to Australia, the U.S., and the rest of the world — all in just three trades.
It is a simple, low-cost approach that gives beginners and seasoned investors alike a strong foundation for compounding wealth over the long term.
