Broadly speaking there are 2 types of risks that investors face – market risk and company-specific risk. When you own a diversified portfolio of shares, you are shielded from the negative impact of any single company, which reduces the overall risk of the portfolio.
So, it’s no surprise most investors aim to own a diversified portfolio. This is something that is becoming increasingly easy with the many exchange traded funds (ETFs) now listed on the ASX. However, owning a number of ETFs may mean in reality you own far more stocks than required for diversification, which may make it virtually impossible to achieve market beating returns.
This is why I believe adding the following 3 ASX 200 stocks could be a great place to start for someone seeking to diversify their holdings without the use of ETFs.
Washington H. Soul Pattinson and Co Ltd (ASX: SOL)
WHSP or ‘Soul Patts’ is an investment house that boasts a diversified portfolio of uncorrelated investments. Its origins were in owning and operating pharmacies, but today’s portfolio is far broader. A quick look at some of its largest holdings reveals this diversification, with the company owning more than 40% of Brickworks Limited (ASX: BKW), around a quarter of TPG Telecom Ltd (ASX: TPM) and half of New Hope Corporation Limited (ASX: NHC). In addition to its ownership in listed equities, Soul Patts also has investments in real estate and unlisted equities totalling around 4.1% of its $5.5 billion portfolio.
Ramsay Health Care (ASX: RHC)
Ramsay delivers health care services throughout the world and now has a market leading position in Australia, France and Scandinavia. Thanks to its recent Capio acquisition, it now operates in 11 countries with 480 locations and earns just over half of its revenue outside of Australia/Asia. This global exposure offers great diversification in a defensive industry also seeing a rise in life expectancy.
Macquarie Group (ASX: MQG)
With a market cap of around $48 billion, Macquarie is one of the largest companies listed on the ASX and currently has $563.4 billion in assets under management as at 30 September 2019. The company has a diverse business mix across its 4 business groups of asset management, banking and financial, commodities and global markets and Macquarie capital. Macquarie also generates 66% of its income internationally. As a bonus, Macquarie has also been growing its dividends at a constant annual growth rate of 13% since listing in 1996 and MQG shares currently offer an annual grossed up dividend yield of 5.05%.
All 3 companies have a great diversified income streams, which, when added to a portfolio, would help build a great base layer. In addition, they each operate in different sectors of the market and have a strong dividend payment history.
The post Diversify your portfolio with these 3 ASX 200 shares appeared first on Motley Fool Australia.
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Motley Fool contributor Michael Tonon owns shares in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. 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 Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019