Australia is one of the richest countries in the world. However, diversification is not utilised by a lot of ASX investors. Most people have a lot of their wealth tied up in one or a handful of properties plus banks. Arguably, the bank shares are also heavily linked to the property market.
Therefore, I think it's very important for every investor to diversify away from these two areas.
Here are three ideas to do that:
BetaShares Asia Technology Tigers ETF (ASX: ASIA)
Asia is the region which is undergoing the most change with many of the citizens there seeing an uplift in wealth and spending. The US has a number of high-quality technology businesses and there are some good ones in Asia too.
The biggest companies in Asia happen to be the ones with the brightest prospects like Alibaba, Tencent, Taiwan Semiconductor Manufacturing and Samsung.
These businesses are trading at a lower valuation than their US counterparts, so they could be long-term opportunities. However, the coronavirus is causing share prices to fall right now which is painful in the shorter-term, but 2020 could be an opportunistic time to increase your exposure to Asia.
Propel Funeral Partners Ltd (ASX: PFP)
Propel is the second largest funeral operator in Australia and New Zealand. The benefit of being smaller than rival InvoCare Limited (ASX: IVC) is that Propel has plenty of potential to expand by acquisition before its market share becomes an issues for the ACCC.
Propel has very defensive earnings. After all, there's only two things certain in life – death and taxes. It can grow its earnings in a number of different ways. It can acquire other funeral operators, it can organically increase its funeral prices, it can increase its market share where it operates and it can benefit from the ageing population tailwind.
Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050.
Propel is trading at 21x FY20's estimated earnings with a projected grossed-up dividend yield of 4.75%.
Australian Ethical Investment Limited (ASX: AEF)
Ethically-focused fund manager Australian Ethical is seeing a impressive rise in its funds under management (FUM) each period.
Australian Ethical reported that in the December 2019 quarter it grew its FUM by 6.3% to $3.87 billion over the quarter, up from $3.64 billion.
After the bushfires there is a much bigger prominence of climate change discussion in the media, which could see more people give their regular investing capital or superannuation fund money to Australian Ethical to manage.
A couple of months ago Australian Ethical advised that the mid-point of its growth expectations for underlying net profit after tax would see a 38.7% rise for the six months to 31 December 2019.
Foolish takeaway
All three of these businesses offer different earnings profiles to the ASX. Propel would be the slow-and-steady pick whilst the other two could be solid options for growth. Investors have sent the Australian Ethical share price a lot higher so it looks quite expensive, but there are plenty of the risks with Asian shares, even though the ETF is reasonably diversified.
