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||Nasdaq-100 Index, including Apple, Amazon, Facebook and Microsoft.||Download|
|ASIA||Asia Technology Tigers, including Tencent, Alibaba and JD.com.||Download|
|MNRS||Global Gold Miners, including Barrick Gold, Goldcorp and Newmont Mining Corp.||Download|
|FUEL||Global Energy Companies, including Chevron, Exxon and Royal Dutch Shell.||Download|
|FOOD||Global Agriculture Companies, including Monsanto, Deere & Co and Associated British Foods.||Download|
|BNKS||Global Banks, including JP Morgan Chase, Bank of America and Citigroup.||Download|
|DRUGS||Global Healthcare Companies, including Johnson & Johnson, Pfizer and GlaxonSmithKline.||Download|
|HACK||Global Cybersecurity Companies, including Palo Alto Networks, Symantec and Cisco Systems.||Download|
|RBTZ||Global Robotics and Artificial Intelligence Companies, including Nvidia, Keyence and Intuitive Surgical.||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|
|QCB||BetaShares Commodities Basket ETF – Currency Hedged (synthetic)¹ – Provides exposure to the performance of a diversified portfolio of commodities including livestock, agriculture, precious metals, industrial metals and energy.||Download|
|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|
|QAG||BetaShares Agriculture ETF – Currency Hedged (synthetic)¹ – Provides exposure to a portfolio of the most significant agricultural commodities.||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.
Instead of investing in several ETFs, just a single investment is required. When you buy a BetaShares Diversified ETF you get access to a well-rounded portfolio in line with your risk profile in a single trade.
BetaShares Diversified ETFs are constructed using multiple underlying ETFs that provide exposure across a range of asset classes, including shares, property securities, bonds and cash, and across Australian and global markets.
There are four BetaShares Diversified ETFs available which have been specifically developed for different risk profiles, meaning you can pick the portfolio to suit your financial circumstances and investment goals. The BetaShares Diversified ETFs are built using varying allocations to growth assets (such as international and Australian shares and property security exposures) vs. defensive assets (such as international and Australian bonds and cash).
BetaShares Diversified ETF series
|DZZF||BetaShares Diversified Conservative Income ETF – An all-in-one investment solution, providing exposure to a diversified multi-asset portfolio that aims to generate monthly income and provide some potential for capital growth.||Download|
|DBBF||BetaShares Diversified Balanced ETF – Gain exposure to a diversified multi-asset portfolio balanced between growth and defensive assets.||Download|
|DGGF||BetaShares Diversified Growth ETF – Access a low-cost, multi-asset class portfolio that is orientated towards growth over the long term.||Download|
|DHHF||BetaShares High Growth ETF – Access a multi-asset class portfolio with high growth potential, for investors with a high tolerance for risk.||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.