While it might be tempting to load up a portfolio full of the hottest stocks like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO), having too much exposure to one particular sector can be a bad thing for a portfolio.
You only need to look at the travel sector to see this. Through no fault of their own, the shares of Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) have been crushed in 2020 because of the pandemic.
If you had a portfolio with significant weighting to the travel sector, you would be severely underwater right now compared to those with more balanced portfolios.
With that in mind, here are two top ASX shares you could diverse your portfolio with:
Betashares Nasdaq 100 ETF (ASX: NDQ)
The first option for investors to consider is the Betashares Nasdaq 100 ETF. As its name implies, this exchange traded fund gives investors exposure to the famous Nasdaq 100 index. These are 100 of the largest, non-financial businesses on the NASDAQ exchange. There are countless household names included in the fund such as Amazon, Apple, Costco, Netflix, Starbucks, and video conferencing provider Zoom. Given the positive outlooks for the companies on the index, I feel the exchange traded fund offers strong potential returns as well as diversity.
BHP Group Ltd (ASX: BHP)
If you’re one of the many investors that doesn’t have any exposure to the resources sector, then doing so could be an easy way to bring some diversification to your portfolio. My favourite option in the sector is BHP, just ahead of fellow mining giant Rio Tinto Limited (ASX: RIO). I like BHP due to its diverse and world class operations, their low costs, its strong balance sheet, and the bumper free cash flow it generates. The latter is likely to lead to generous dividend payments over the coming years.
And here are five dirt cheap shares which could be great additions to a balanced portfolio right now. They have just been given buy ratings.
5 cheap stocks that could be the biggest winners of the stock market crash
Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.
Courtesy of the crashing stock market, these 5 companies are suddenly trading at significant discounts to their recent highs… creating what could be incredible opportunities for bargain-hungry investors.
Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares to buy now… before the next stock market rally.
Returns as of 7/4/2020
More reading
- 3 top-notch ASX shares on my May watchlist
- 3 emerging trends in ASX resources shares
- 3 ASX dividend kings to buy and hold forever
- 3 cheap ASX 200 shares for value investors
- These ASX shares booked the biggest gains last week
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO and Xero. The Motley Fool Australia has recommended Flight Centre Travel Group 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 post Why diversification is important and how to diversify your portfolio with ASX shares appeared first on Motley Fool Australia.
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