The share market is full of different businesses in different sectors, yet lots of investors are drawn to the same few shares of the big four banks, Telstra Corporation Ltd (ASX: TLS) and so on.
If an investor can diversify their portfolio without reducing the returns it achieves risk diversification and mitigates problems if a particular industry, such as big banks, faces a problem.
Here are three shares I'd be very happy to diversify my portfolio with:
TPG Telecom Ltd (ASX: TPM)
Most people have exposure to Telstra, but I think TPG is the better telco choice. It may also be losing out due to lower margins with the NBN like Telstra, but I think it can also gain more.
TPG is committed to offering customers the best deal and the best value they can get, which should win market share.
I'm also convinced that TPG's plan to launch its own mobile networks in Australia and Singapore will be worthwhile because the launch of 5G should mean some customers are willing to ditch broadband altogether.
National Veterinary Care Ltd (ASX: NVL)
National Veterinary Care is one of the most exciting small caps in my opinion. It operates in the pet industry which offers steady growth thanks to the growing human and pet populations.
The business generates a lot of recurring revenue because three quarters of dogs and two thirds of cats visit the vet each year.
National Veterinary Care is generating decent organic growth but the main reason why I think it could be a market beater is that it's acquiring more veterinary clinics at an impressive rate each year, which accelerates profit growth.
Macquarie Group Ltd (ASX: MQG)
If you have to buy a big bank then Macquarie would definitely be my choice. It is much more globally focused than the others and offers defensive earnings due to its asset management business.
Macquarie management seem to be more proactive and forward-thinking, which should see it navigate any problems the Australian and global economies have in the future, or at least do better than its large competitors.
The bank has provided guidance of around 10% profit growth for FY18, which is much better than its large financial peers.
Foolish takeaway
I believe that all three shares are quality businesses, but it's worth being cautious at the current elevated prices of the market. Personally, I'd put National Vet Care ahead of the other two because it has the potential to grow a lot more over the next few years.
