The 3 ETFs to Buy for a Truly Well-Diversified Portfolio

Passive investors looking to create meaningful wealth over the long-term do have a plethora of options these days to choose from. The rise of the exchange traded fund (ETF) has changed the game for all investors, for that matter. These passive funds which track a basket of stocks (and rebalance periodically as per various criteria put in place by managers) provides some of the lowest-cost diversification money can buy. 

That said, there are thousands of ETF options to choose from, making choosing the right ETF (or grouping of ETFs) to provide the broadest and most effective diversification (at rock-bottom fees) an incredibly important investing decision for millions of investors out there.

I don’t think passive investing trends are likely to slow down, and expect to see capital flows continue to surge in the ETF space. Investors looking for the best and most reliable vehicles to put capital to work over the long-term will want the stability various ETFs can provide. 

Of course, there’s the reality that within even index-level ETFs, investors can be under-diversified on the basis of geography (which index one chooses in the global market). These three ETFs provide the kind of broad global exposure I think most investors ought to be after right now. 

For those seeking the broadest possible diversification right now, here are three ETFs I think are worth considering, particularly as capital continues to rotate out of the U.S. and into other various markets around the world. 

KraneShares CSI China Internet ETF (KWEB)

China remains the world’s second-largest economy, and it’s a market most long-term investors will want at least some exposure to. The KraneShares CSI China Internet ETF (KWEB) provides investors with exposure to the best and brightest growth stocks China has to offer.

The KWEB ETF focuses on the 30 largest tech companies in China, with major holdings including the likes of Alibaba, Tencent, PDD Holdings, and plenty of other high-growth names in this space. 

The ETF is a significant player in the world of U.S.-listed Chinese stocks, though plenty of other larger ETFs are available on major Hong Kong and Chinese exchanges. But for U.S. investors looking for exposure to the long-term growth upside China and its tech companies can provide, this ETF is (for now) one of the best options to consider right now.

Given where Chinese stocks are trading, this fund’s ultra-low price-earnings ratio overall (particularly when compared to Western markets such as the U.S.) and its dividend yield above 3% are very attractive for those seeking reliable total returns over the very long-term. 

Vanguard Total Stock Market ETF (VTI)

Investors of all nationalities have largely flooded into U.S. markets in recent years, as U.S. exceptionalism has been on full display. Major U.S. indices, which are tracked by the Vanguard Total Stock Market ETF (VTI), have outperformed nearly every other region in the world over the past decade or so. Much of this has to do with the various policies put in place following the last two recessions, which saw the U.S. economy grow its way out of a rut much faster than its global peers.

Unlike other ETFs which track just one U.S. index like the Nasdaq, Dow Jones, or S&P 500, the Vanguard Total Stock Market ETF tracks the CRSP U.S. Total Market Index. This means that this particular fund provides investors with exposure to more than 3,700 companies of all market capitalization sizes.

In other words, this isn’t another run-of-the-mill mega-cap heavy index ETF. Rather, VTI provides exposure to a much broader range of stocks, ensuring greater stability during down markets in the tech sector (but also providing significant exposure to the growth upside of the tech sector, with more than a quarter of its holdings concentrated in this part of the market). 

In my view, VTI is among the best options for investors looking for the best of both worlds – growth and defensiveness/diversification – right now. 

Vanguard FTSE Europe ETF (VGK)

Last, but not least, we have the third key economic area most investors want to hone in on, especially when considering the shifting geopolitical dynamics of this Trump administration. The Vanguard FTSE Europe ETF (VGK) is among the largest Europe-focused ETFs, holding more than 1,000 stocks within its portfolio. 

Europe has become an intriguing place for investors to consider putting capital to work. Much of this shift has to do with Trump’s policies, and their impact on how investors view the relative safety or defensiveness of investing within the U.S. market relative to other developed economies, such as those in Europe. 

The VGK ETF is well-diversified across various markets and sectors within Europe, with this ETF holding a number of world-class healthcare, financials and industrial companies U.S. investors may be lacking exposure to in their current portfolios. For those seeking the most reliable long-term returns, holding some approximation of these three ETFs is a smart move, at least in my view. 

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