Profit Without Panic: 7 ETFs to Diversify Your Portfolio

As the name implies, the Vanguard Total Stock Market ETF (NYSEARCA: VTI) gives you broad exposure to virtually the entire stock market. The fund tracks the performance of the MSCI US Broad Market Index, which represents at least 99.5% of the total market capitalization and over 3,600 individual U.S. stocks.  

This means investors should expect the fund’s performance to approximate that of the U.S. stock market. In 2024, for example, the fund delivered a total return of around 26%. Part of that total return comes from the fund’s annual dividend, which has a yield of about 1.07% as of February 2025. 

To get that performance, the fund is heavily weighted towards technology stocks. However, no individual stock is more than about 6.5% of the fund’s overall weighting, and it has an expense ratio of 0.03%.  

This is a relatively young fund. It’s only been in existence since 2021, but it already has over $447 billion in assets under management.  

While a fund like the VTI is exceptional at delivering broad market coverage, it lacks when it comes to providing sector-specific exposure. For example, energy stocks are cyclical, but their stable, defensive posture is attractive to many investors.  

The Energy Select Sector SPDR Fund (NYSEARCA: XLE) gives you exposure to all areas of the oil sector. Integrated oil companies such as Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) make up nearly 40% of the fund’s weighting. However, you also get exposure to midstream companies and oil services companies.  

The fund has delivered a total return of 48% in the three years ending January 31, 2025. And if you go back longer than that, you’ll see a consistent double-digit rate of return. Plus, the fund delivers an annual dividend with a yield of approximately 3.6%. The XLE has over $32 billion in assets under management and a low expense ratio of just 0.09%.  

The iShares Core High Dividend ETF (NYSEARCA: HDV) is a dividend lover’s dream. The fund consists of 75 established, high-quality U.S. companies and can be the core of every income-oriented investor’s portfolio.  

The fund is most heavily weighted in Consumer Staples and Energy stocks. However, no single stock takes up more than 10% of the fund’s weighting. The fund pays a quarterly dividend that yields approximately 3.6% as of February 2025. It has provided investors with a total return of approximately 24% in the last three years.  

That kind of performance isn’t going to excite growth investors. But if you’re looking to carve out some room for steady income growth, the HDV fund is a solid choice. That’s particularly true since the fund has a low net expense ratio of 0.08%.  

The fund launched in 2011 and has grown to have approximately $11 billion in assets under management.  

The Vanguard Financials ETF (NYSEARCA: VFH) is one of the top financial ETFs to consider. The fund tracks the Morgan Stanley Capital International (MSCI) Investable Market Financials Index. This provides exposure to large- mid- and small-cap companies in the financial sector. 

The fund has over 25% (26.1%) exposure to bank stocks. But you also get nearly equal exposure (approximately 20%) to insurance, capital markets, and diversified financial services companies. The fund’s top two holdings are JPMorgan Chase & Co. (NYSE: JPM) and Berkshire-Hathaway (NYSE: BRK.B).  

But why single out financial stocks? Like bank stocks, financial ETFs don’t deliver market-beating returns, but they still offer higher returns than you can get from bonds or cash. And they tend to deliver returns that keep your portfolio ahead of inflation. That’s played out in the last three years, with the fund delivering a total return of over 40%. This performance includes an annual dividend with a yield of 1.9%. The fund has a net expense ratio of 0.10%. 

Diversity within stocks is about more than owning stocks in different sectors. It also means choosing diversity in the size of the companies you own. That’s a reason to consider the iShares Russell 2000 ETF (NYSEARCA: IWM). The fund broadly tracks the performance of the Russell 2000 Index which is generally referred to as the small-cap index.  

Small-cap stocks can be volatile and have a negative correlation with interest rates. That’s why it was challenging to own small-cap stocks when the Federal Reserve was raising interest rates in 2022 and 2023. Still, in the five years ending February 2025, the fund delivered a total return of around 50%.  

The IWM ETF helps smooth out that volatility by providing broad exposure to a variety of sectors. No sector accounts for more than 10% of the weighting inside the fund, and no individual holding accounts for more than 0.5% of the fund. The fund has $71.9 billion of assets under management and has an expense ratio of 0.19%.  

So far, the funds that we’ve highlighted have been heavily, if not exclusively, invested in U.S. companies. But another consideration for portfolio diversity is international exposure. The JPMorgan BetaBuilders Emerging Markets Equity ETF (BATS: BBEM) is a fund to consider for exposure to large- and mid-cap companies in emerging markets. 

The fund seeks to deliver investment results that correspond to the Morningstar Emerging Markets Target Market Exposure index. China and India are the two countries with the highest exposure by weight with each country making up about 18% of the fund’s weighting. Technology and financial stocks make up about 50% of the fund’s individual holdings.  

The fund has only been trading publicly since 2023. But it’s already delivered a return of approximately 12%. The BBEM fund has $915 million in assets under management and has a net expense ratio of 0.15%.  

Another consideration in a diversified portfolio is exposure to a variety of asset classes. For some investors that diversity means precious metals, and that usually means gold. There are many ways to invest in gold, but the SPDR Gold Shares ETF (NYSEARCA: GLD) is a key name for fund investors to consider. The fund is 100% invested in gold with an objective to reflect the performance of the price of gold bullion minus the fund’s expenses.  

The benefit of investing in a fund means you get the benefits of owning gold without the challenges that can arise to provide physical storage and security. And unlike gold mining stocks, the performance of the GLD fund is directly correlated to the spot price of gold.  

In 2024, gold was one of the best-performing asset classes. But taking a longer view, the fund is up over 73% in the last five years.