How ASX 200 stocks and ASX ETFs can be combined to build the perfect portfolio

When it comes to building a strong, balanced portfolio for the long term, there's no single right way to do it.

But for many investors, combining ASX 200 stocks with ASX exchange traded funds (ETFs) offers the best of both worlds: the potential for individual stock outperformance, alongside the diversification and simplicity of ETFs.

Let's explore how these two investment tools can work together — and why they might be the key to building the perfect ASX portfolio.

Why start with ASX ETFs?

ETFs can be the foundation of a solid portfolio. With a single trade, you can gain exposure to hundreds (or even thousands) of stocks across industries, geographies, and market caps.

For example, the Vanguard Australian Shares Index ETF (ASX: VAS) provides broad access to the top 300 shares on the ASX. This includes blue chips like BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and CSL Ltd (ASX: CSL).

Meanwhile, ASX ETFs like the iShares S&P 500 ETF (ASX: IVV) give you a stake in the world's biggest and most profitable companies. This includes Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Nvidia (NASDAQ: NVDA).

Why add ASX 200 stocks?

While ETFs are a fantastic foundation, individual ASX 200 stocks can add extra firepower to a portfolio. By handpicking quality businesses, you have the potential to outperform the broader market.

For example, shares like Xero Ltd (ASX: XRO), WiseTech Global Ltd (ASX: WTC), ResMed Inc. (ASX: RMD) and even Pilbara Minerals Ltd (ASX: PLS) have delivered outsized returns over the past five years, rewarding investors who believed in them.

The key is to be selective: focus on businesses with strong competitive advantages, consistent earnings growth, and clear long-term trends working in their favour.

The best of both worlds

By combining ASX 200 stocks and ETFs, you create a portfolio that's diversified (through your ETFs), focused on growth and income (via individual stocks), and flexible and tailored to your goals.

For example, you might allocate 70% of your portfolio to core ASX ETFs like VAS, IVV, or the hugely popular Betashares Nasdaq 100 ETF (ASX: NDQ). The remaining 30% could be your individual positions — handpicked ASX 200 stocks with strong long-term potential.

This approach helps you capture broad market gains while also backing specific companies you believe in.

Foolish takeaway

There's no one-size-fits-all formula for the perfect portfolio. But blending ASX ETFs for diversification and ASX 200 stocks for targeted growth is a strategy that can help you build wealth steadily over time. The key is to stay consistent, focus on quality, and let time and compounding do the hard work for you.

The post How ASX 200 stocks and ASX ETFs can be combined to build the perfect portfolio appeared first on The Motley Fool Australia.

Motley Fool contributor James Mickleboro has positions in BetaShares Nasdaq 100 ETF, CSL, ResMed, WiseTech Global, and Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, BetaShares Nasdaq 100 ETF, CSL, Microsoft, Nvidia, ResMed, WiseTech Global, Xero, and iShares S&P 500 ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF, ResMed, WiseTech Global, and Xero. The Motley Fool Australia has recommended Apple, BHP Group, CSL, Microsoft, Nvidia, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2025