Why it is important to diversify your ASX portfolio and how you can do it

Don’t invest all your money in Webjet Limited (ASX:WEB) shares, here’s why you should diversify…
The post Why it is important to diversify your ASX portfolio and how you can do it appeared first on Motley Fool Australia. –

In order to maximise your potential returns and limit the damage of market shocks, I believe investors should ensure that their portfolio is diversified.

A good example of why this is important is the travel sector. If the COVID-19 pandemic had never occurred, I suspect Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) shares would have generated strong returns for investors in 2020.

However, with the pandemic coming out of nowhere and bringing global travel markets to their knees, both Flight Centre and Webjet shares are down materially this year. 

This means that if your portfolio had a high weighting to the travel sector, it would have been impacted significantly more than a balanced portfolio.

How can you diversify?

There are a number of ways to diversify your portfolio. The first is to maintain a decent sized portfolio with exposure to different industries and sectors.

A conglomerate such as Wesfarmers Ltd (ASX: WES) could be a good option as it gives investors exposure to a number of industries through the one company.

But perhaps an easier way to achieve this is through exchange traded funds (ETFs). These funds give investors the option of investing in whole indices, countries, sectors, or even themes through a single investment.

But which ETFs should you buy? Listed below are two that I think would be great for diversification:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

If you don’t have meaningful exposure to the tech sector, then the BetaShares NASDAQ 100 ETF could be a great option. It gives investors access to 100 of the largest non-financial companies on the famous Nasdaq index. This includes some of the biggest tech companies in the world such as Amazon, Apple, Facebook, and Google.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

Another great option to consider buying is the Vanguard MSCI Index International Shares ETF. This ETF is arguably as diverse as it gets. It provides investors with exposure to some of the world’s largest companies listed in major developed countries. Among its largest holdings are the likes of Amazon, Apple, Microsoft, Nestle, and Visa.

These 3 stocks could be the next big movers in 2020

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

Find out the names of our 3 Post COVID Stocks – For FREE!

*Returns as of 6/8/2020

More reading

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS, Flight Centre Travel Group Limited, and Vanguard MSCI Index International Shares ETF. 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.

The post Why it is important to diversify your ASX portfolio and how you can do it appeared first on Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!