As many investors reevaluate their portfolios and start to actively take control of their investments, some are curious about just how to use exchange traded funds (ETFs) to construct a diversified and well-balanced portfolio.

Although there are various ways to diversify, Roger Nusbaum, a contributor at TheStreet, follows a Mohammed El-Erian type portfolio with allocations in equity, bonds and real assets. El-Erian is the CEO and co-CIO of PIMCO.

Nusbaum took a look at ETF choices that fit in with El-Erian’s concept:

In the equity portion, he suggests allocating 10% to the PowerShares S&P 500 Buy Write Portfolio (PBP) and 5% to the iShares S&P 600 Small Cap ETF (IJR) which enables investors to benefit from fact that small-cap stocks generally lead the way in the early stages of a stock market cycle.

Additionally, he suggests allocating 10% of a portfolio to the WisdomTree International Large Cap Dividend ETF (DOL) and 5% to the SPDR S&P International Small Cap Index Fund (GWX). In regard to gaining access to emerging markets, Nusbaum suggests looking at the PowerShares BLDRS Emerging Market 50 Index Fund (ADRE).

Next, he suggests adding fixed-income ETFs to a portfolio. In this portion, he states one should look at the iShares Barclays Agency Fund (AGZ) or iShares S&P/Citigroup 1-3 Year International Treas (SHY). PIMCO also offers a PIMCO 1-3 Year U.S. Treasury Index Fund (TUZ).

To wrap up fixed income, he suggests the use of iShares S&P Citigroup International Treasury (IGOV).

In regard to real assets, Nusbaum suggests utilizing the WisdomTree International Real Estate ETF (DRW) the SPDR Gold Trust (GLD) and the PowerShares DB Agriculture Fund (DBA). Additionally, he suggests gaining exposure to infrastructure through the iShares S&P Global Infrastructure Fund (IGF).

Lastly, he states that one should allocate 8% to special opportunities like the PowerShares Water Portfolio (PHO).

In addition to this, we suggest that one utilize a strategy when investing, such as monitoring market trends using the 200-day moving average.  More on the trend following strategy can be found in our new book.

For more stories on portfolio construction and the use of ETFs, visit our ETF education category.

Kevin Grewal contributed to this article.

Tags: ADRE, Agriculture, AGZ, Bond ETFs, China, Commodity ETFs, DBA, Emerging Markets, ETF 101, ETF Book, GLD, Gold, GWX, IGF, IGOV, IJR, Infrastructure, PBP, PHO, Real Estate, Sector ETFs, SHY, Small-Cap, Treasury ETFs, Trend Following, TUZ, Water