Now that we have explained why it is important to diversify your portfolio, it's time for the fun part -- picking which stocks to buy for it.
While there are many options on the stock market, and in MyWallSt's shortlist of companies, it's still hard to know which exact stocks offer diversification. So, without further ado, here are three of the best stocks to diversify your portfolio with in 2021.
Top of the list is one of the best-performing stocks on our shortlist. Sea Limited (NYSE: SE) is a great diversity play because it is a giant in the digital gaming and e-commerce markets in Southeast Asia.
Not only does Sea Limited offer diversification through geographic location, but it also covers two booming industries, gaming and online shopping. The Singapore-based company is a great investment due to its fast revenue growth and visionary CEO. In addition, it is in a thriving market that is really taking to the digitalization of shopping and gaming, two fields that are expected to continue to grow well into the future.
The greatest benefit of investing in companies from different countries is that it allows you to minimize risk as varying markets perform well at different times. Say there was a new law passed in the U.S. that puts a higher tax on e-commerce companies, for example, businesses like Sea Limited that are located overseas would not be affected so would help lessen the blow on your investments. While long-term investors do not have to worry too much about short-term noise like law changes, a geographically diversified portfolio still helps you benefit from developing markets and industries.
2U (NASDAQ: TWOU) is classed by Wall Street as a growth and small-cap stock, meaning it offers investors diversification not only through its size but also with its future potential.
As a small-cap stock, the company allows shareholders to benefit from it by revolutionizing the education space, whilst still being affordable given the huge growth potential it offers.
Picking up a few small-cap stocks that are also classed as growth businesses is a great idea because it offers the opportunity to massively increase the returns in their portfolio as these companies are trading at affordable prices now, but are expected to blow up soon.
While large and medium cap stocks offer more stability during times of market volatility, which can help your portfolio weather any storm, holding a mix of stocks with different market capitalizations is key to success. This method will allow you to strike a perfect balance between steady, reliable stocks and younger, high-growth opportunities.
This company made investing famous and it is still a huge player on Wall Street. Not only is Berkshire Hathaway (NYSE: BRK.B) well-respected by investors across the globe, the stock also offers instant diversification by allowing you to invest in multiple industries in one single purchase.
Berkshire could be compared to an ETF of hand-picked stocks by a team with decades of experience on Wall Street, boosting one of the best long-term track records. Legacy brands such as Apple, Coca-Cola, American Express, and Procter & Gamble are just some of the holdings on its list as well as growth stocks including EV manufacturer BYD.
The main advantage of buying shares in Berkshire is that it is a holding company for multiple businesses which means you get a small piece of growth from many stocks. It covers lots of industries, including consumer goods, insurance, and finance, so it is an easy way to ensure you have your finger in every pie. While other stock prices might fluctuate at different times throughout the year as they react to economic and wider market issues, Berkshire shareholders shouldn't feel the burn as its other holdings should counterbalance any significant drops.
Read the other articles in our Diversify series here;
Why Should I Diversify My Stock Portfolio?
3 Best Stocks To Diversify My Portfolio With 2021.
3 Stocks I Should Buy To Geographically Diversify My Portfolio
Which ETFs Should I Invest In To Diversify My Portfolio?
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