What is portfolio diversification?
The importance of diversification in your investment portfolio cannot be overestimated. Diversification means spreading your investments across a range of asset classes such as shares or bonds, geographic regions and industry sectors – and within an asset class, spreading your money across multiple individual investments.
Diversification can reduce your investment risk. Different asset classes or investments don’t always perform well at the same time. In a diversified portfolio, if one portion of the portfolio performs poorly over a certain period, this could be offset by the better performance of another part of your portfolio, so you are less likely to suffer a big loss across your portfolio. In simple terms, diversification is about not putting all your eggs in one basket.
ETFs, one of the fastest growing investment products globally, are a simple and cost-efficient way to instantly increase investment diversification to your portfolio.
Building blocks for a diversified portfolio
BetaShares ETFs cover a number of major asset classes including:
Allocating your investment funds across several major asset classes can help to protect your portfolio when sharemarkets fall, as other asset classes like commodities and fixed income may continue to perform well during sharemarket downturns.
How to diversify your portfolio
One way to build a more diversified portfolio is to invest into industry sectors that are under-represented in the Australian sharemarket. Another way to diversify portfolios is to tap into sectors that are not readily accessible in the Australian sharemarket.
For example, the technology sector is one of the fastest-growing in the world but is under-represented on the Australian sharemarket. However, Australian investors can use ETFs to easily gain exposure to the global technology sector. Apple, Google, Facebook and Amazon – some of the biggest and most exciting companies in the world – can all be accessed through the BetaShares Nasdaq 100 ETF (NDQ) in a single trade.
BetaShares provides exposure to global growth sectors and companies via our Global Sector ETFs. With one trade on the ASX you can access global growth sectors, countries and regions to take advantage of opportunities that may not be available by investing in Australian-based companies
Global Sector Series
|NDQ||BetaShares NASDAQ 100 ETF - Gain exposure to many of the world’s most innovative companies that are revolutionising our everyday lives – including Apple, Amazon, Google and more||Download|
|ASIA||BetaShares Asia Technology Tigers ETF - Gain exposure to the 50 largest Asian technology companies (ex-Japan)||Download|
|MNRS||BetaShares Global Gold Miners ETF - Currency Hedged – An effective way to gain access to a diversified portfolio of the world’s leading gold mining companies||Download|
|FUEL||BetaShares Global Energy Companies ETF - Currency Hedged – Access the world’s largest energy companies in a single ASX trade – hedged back to the Australian dollar||Download|
|FOOD||BetaShares Global Agriculture ETF - Currency Hedged - Access the world’s leading agriculture companies in a single ASX trade – a sector with strong growth prospects||Download|
|BNKS||BetaShares Global Banks ETF - Currency Hedged – Access the world’s largest banks||Download|
|DRUG||BetaShares Global Healthcare ETF - Currency Hedged - Gain exposure to a portfolio of the world’s leading healthcare companies||Download|
|HACK||BetaShares Global Cybersecurity ETF - Access the world’s leading cybersecurity companies - a sector with strong growth prospects||Download|
|RBTZ||BetaShares Global Robotics and Artificial Intelligence ETF – Invest in the companies leading the Robotics and Artificial Intelligence (A.I.) megatrend – a sector likely to have a profound impact on the world of tomorrow||Download|
Portfolio diversification with alternative asset classes
When building a diversified portfolio, it can pay to look beyond the most common asset classes such as shares and bonds, and consider ‘alternative’ asset classes such as currencies and commodities. Because they historically have had a low correlation with other investments, an allocation to these asset classes can help to reduce portfolio risk.
Institutional investors, such as large superannuation funds and insurers, have been allocating to alternative assets in their portfolios for decades. Individual investors are now able to do the same via a growing range of ETFs that offers exposure as easily as buying a share on the ASX.
BetaShares has a number of funds with exposure to these alternative asset classes, including:
|ASX Code||Description of fund and investment exposure||Factsheet|
|OOO||BetaShares Crude Oil Index ETF – Currency Hedged (synthetic)² – Provides exposure to the performance of crude oil futures.||Download|
|QAU||BetaShares Gold Bullion ETF – Currency Hedged – Provides exposure to the performance of physical gold bullion.||Download|
|POU||BetaShares British Pound ETF – Provides exposure to the performance of the British Pound relative to the Australian Dollar.||Download|
|EEU||BetaShares Euro ETF – Provides exposure to the performance of the Euro relative to the Australian Dollar.||Download|
|YANK||BetaShares Strong U.S. Dollar Fund (hedge fund) – Provides geared exposure to the value of the U.S. dollar relative to the Australian Dollar.³||Download|
|USD||BetaShares U.S. Dollar ETF – Provides exposure to the performance of the U.S. Dollar relative to the Australian Dollar.||Download|
|AUDS||BetaShares Strong Australian Dollar Fund (hedge fund) – Provides geared exposure to the value of the Australian Dollar relative to the U.S. Dollar.³||Download|
Portfolio diversification with a single ETF
BetaShares Diversified ETFs are designed to simplify the process of diversifying your portfolio even further, with the following funds available to trade on the ASX:
The BetaShares Ethical Diversified ETFs (ASX: DBBF, DGGF and DZZF)
The BetaShares Ethical Diversified ETFs are cost-effective, all-in-one portfolio solutions for investors whose priority is investing in a way that aligns with their values.
The Ethical Diversified ETFs provide passively blended exposure to true-to-label, ethically-screened, multi-asset portfolios, and are offered across three risk profiles: Balanced, Growth and High Growth. They are built using BetaShares’ market-leading range of RIAA – certified ethical ETFs*, which now account for over $1.9 billion in funds under management.
The BetaShares Diversified All Growth ETF (ASX: DHHF)
DHHF is an all-in-one investment solution designed to simplify the process of investing in a diversified share portfolio with the potential for high growth.
DHHF is invested in a blend of large, mid and small-cap equities from Australia, global developed and emerging markets, and provides access to approximately 8,000 equity securities listed on over 60 global exchanges.
DHHF is designed to suit investors who have a very high tolerance for risk and who are therefore willing to accept a high degree of volatility in their portfolio in order to achieve their long-term objective. DHHF is passively blended using ETFs issued by BetaShares and other leading ETF managers to provide an ‘all cap, all world’ investment exposure, and includes ETFs that trade on the ASX, as well as on overseas exchanges.
* The underlying BetaShares ETFs have been certified by the Responsible Investment Association Australasia (RIAA) according to the strict operational and disclosure practices required under the Responsible Investment Certification Program. See www.responsibleinvestment.org for details. The Responsible Investment Certification Program does not constitute financial product advice. Neither the Certification Symbol nor RIAA recommends to any person that any financial product is a suitable investment or that returns are guaranteed. Appropriate professional advice should be sought prior to making an investment decision. RIAA does not hold an Australian Financial Services Licence.
BetaShares Diversified ETF series
|DZZF||BetaShares Ethical Diversified High Growth ETF – Gain exposure to a true-to-label multi-asset class ethical portfolio, with high growth potential.||Download|
|DGGF||BetaShares Ethical Diversified Growth ETF – Gain exposure to a true-to-label multi-asset class ethical portfolio, with the potential for growth.||Download|
|DBBF||BetaShares Ethical Diversified Balanced ETF – Gain exposure to a true-to-label multi-asset class ethical portfolio, balanced between growth and defensive assets.||Download|
|DHHF||BetaShares Diversified All Growth ETF – Access a cost-effective diversified portfolio with high growth potential that may suit investors with a very high tolerance for risk. DHHF has a 100% allocation to shares, including Australian, global developed and emerging markets.||Download|
Explore our full range of Funds to find investment tools that help you meet your investment objectives.
There are risks associated with an investment in the BetaShares Funds, including (without limitation):
- in relation to the Global Sector Series – market risk, sector risk, concentration risk and currency risk
- in relation to the Commodity Funds – market risk, commodity volatility risk, commodity roll risk, derivatives risk and currency hedging risk
- in relation to the Currency Funds – market risk, foreign currency risk and interest rate risk, as well as gearing risk and currency futures risk (in relation to YANK and AUDS)
- in relation to the Diversified ETFs – asset allocation risk, market risk, currency risk, underlying ETFs risk and index tracking risk.
For more information on risks and other features of a BetaShares Fund, please see the applicable Product Disclosure Statement.
1. An investment in commodities futures or in a fund that tracks commodity futures is not the same as investing in the “spot” price of the commodity – performance may differ from the spot price.
2. The price of oil futures contracts is not the same as the “spot price” of oil. As such, OOO does not aim to, and should not be expected to, provide the same return as the performance of this spot price. The performance of a fund that is linked to oil futures may be materially different to the performance of the spot price of oil itself. This is because the process of “rolling” from one futures contract to the next to maintain investment exposure can result in either a cost or benefit to the fund, affecting returns. Please refer to the PDS for further information.
3. Gearing magnifies gains and losses and may not be a suitable strategy for all investors.