Diversify your portfolio with these 3 ASX 200 shares

Here's why I believe adding the following 3 ASX 200 stocks could be a great place to start for someone seeking to diversify their portfolio.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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%.

Foolish takeaway 

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.

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.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »