Finding a worthwhile balance between risk and reward can be a challenge for investors. Cash ISAs, for example, may have little risk, but also offer limited return. And while Bitcoin could surge higher, it may also decline sharply as it did in 2018.
As such, buying FTSE 250 shares in order to make a million could be a worthwhile move. Certainly, they may come with significant risks during downturns. But as the index’s track record shows, long-term growth appears to be relatively likely – especially for investors who are able to buy shares at discounts to their intrinsic values.
Therefore, now could be the right time to buy these two FTSE 250 stocks while they appear to trade on low valuations.
A recent addition to the FTSE 250 following its demotion from the FTSE 100, easyJet (LSE: EZJ) has experienced a torrid time in terms of its share price performance. Due to risks facing the wider airline sector, its shares now trade on a price-to-earnings (P/E) ratio of just 6.9. This suggests that investors may have priced in the weak consumer sentiment that faces airlines and that could mean financial forecasts are subject to downgrades in the near term.
However, with the airline industry being cyclical, now could be the right time to buy shares in easyJet. It has a relatively strong balance sheet and appears to have been less affected by recent difficulties for the industry than many of its sector peers. Furthermore, recent updates from the business have shown that it is on track to meet guidance for the current year.
Therefore, while easyJet’s shares may be unpopular at the present time, their risk/reward ratio suggests that they could help you to build a seven-figure portfolio over the long run.
Also unpopular among investors at the present time is FTSE 250-listed housebuilder Bellway (LSE: BWY). As with easyJet, it is experiencing an uncertain outlook, with Brexit-related risks in particular causing investors to become increasingly cautious about the housebuilding sector.
Bellway, though, has reported resilient trading conditions in its recent updates. And while interest rates are expected to rise over the coming years, housing affordability may remain high due to the Bank of England being forecast to adopt a generally dovish stance towards interest rates.
Since Bellway trades on a P/E ratio of 7.2, it seems to offer good value for money at the present time compared to the wider FTSE 250. The shortage of housing that faces a growing UK population means the wider housebuilding industry may enjoy more positive trading conditions than the stock market is pricing in at the present time.
As such, this could make the stock a highly appealing purchase for the long run, with its risk/reward ratio appearing to offer a favourable investment opportunity.
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Peter Stephens owns shares of easyJet. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.