Constructing a balanced portfolio is crucial for creating a robust and steady return over time. Investing in an exchange-traded fund (or ETF) could be a good means for folks to attain this.

Diversification reduces an investor’s publicity to the chance of any single asset performing poorly. It may well additionally scale back a portfolio’s volatility throughout totally different factors of the financial cycle.

As an investor myself, I can obtain this by shopping for particular person shares. However I may also buy an ETF. This fashion, I can unfold my money over a higher variety of shares (and different asset lessons like bonds and commodities).

This technique may also assist me scale back buying and selling prices. Buying an ETF includes only one transaction price, whereas shopping for a number of shares includes a number of.

A prime FTSE inventory

I believe a balanced method of shopping for particular person firms and ETFs is the proper option to go. I can scale back danger, whereas additionally giving myself an opportunity to make market-beating returns by shopping for specific shares.

If I had £20,000 to speculate, I believe Coca-Cola HBC (LSE:CCH) may very well be an important FTSE 100 inventory to contemplate this July. Due to in-demand manufacturers like Coke, Sprite and Fanta, the drinks bottler enjoys steady revenues in any respect factors of the financial cycle.

However the enterprise is way from boring. It has glorious progress alternatives too, because of its huge publicity to Jap European and African growing markets. I’m additionally inspired by its profitable transfer into fast-growing classes like power drinks.

Intense competitors is a continuing hazard for fast-moving shopper items like this. But Metropolis analysts nonetheless anticipate annual earnings to rise strongly over the subsequent few years at the least, starting with a 26% bounce in 2024.

In consequence, Coca-Cola HBC shares at present commerce on a price-to-earnings progress (PEG) ratio of 0.6. At beneath 1, this means {that a} share is undervalued. Proper now, I reckon it may very well be one of many FTSE 100‘s finest low cost shares to contemplate.

… and an important ETF

With a £20,000 funding, technique may very well be to consider investing it equally in Coca-Cola HBC shares and an ETF. There are numerous funds to select from as we speak, however I believe the iShares Core S&P 500 ETF (LSE:CSPX) could also be probably the greatest.

Because the identify implies, this fund offers me publicity to the entire companies that make up the S&P 500 index within the US. This has apparent advantages to anybody who focuses on UK shares and indices. It supplies them with geographical diversification, in addition to publicity to many alternative industries and firms.

This helps me to stability danger whereas additionally providing the potential to make huge long-term returns. iShares ETF has supplied a mean annual return of 12.92% over the previous decade.

One potential downside is the fund’s weighting of round 30% in the direction of cyclical tech shares. These may fall sharply in worth if financial circumstances worsen. Having mentioned that, I nonetheless assume that on stability this may very well be an important fund to consider holding as we speak.