How a small handful of exchange-traded funds can build a meaningful portfolio
Morningstar CEO Kunal Kapoor shares the best ETFs for long-term investing in ‘The Claman Countdown.’
Many people who hesitate to invest do not do so because they think that putting their money in the market is a bad idea. They’re stuck in front of a confusing smorgasbord of options, afraid to pile the wrong things on their plate and at least afraid to look like they don’t know what they’re doing (especially if it’s true). Therefore, analysis defects are often automatic.
Don’t be afraid. There is a quick and easy way to build a sound portfolio by using a small number of exchange traded funds (ETFs). So, without further ado, let’s get some clarity about what will go into this portfolio and how much each ETF should receive.
Here’s the simple ETF portfolio you’ve been looking for
For the portfolio to be considered both good and simple, it needs to be strengthened with the honest help of market tracking index funds. That way, you will get exposure to growth and more diversification, which will help protect you from all kinds of risks.
Traders work on the floor of the New York Stock Exchange in New York City on March 3, 2026. (Brendan McDermid/Reuters)
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Therefore, 65% of the portfolio can be allocated to the Vanguard S&P 500 ETF, and 20% can be allocated to the iShares Core MSCI Total International Stock ETF.
| A ticker | Security | Finally | Change | change % |
|---|---|---|---|---|
| VOO | VANGUARD S&P 500 ETF – USD DIS | 647.30 | -4.24 |
-0.65% |
| XUS | ISHARES TRUST CORE MSCI TOTAL INTL STK | 91.98 | -1.89 |
-2.01% |
The Vanguard ETF has an annual expense ratio of just 0.03% and tracks the performance of large US-listed public companies, while the iShares ETF has an annual expense ratio of 0.07% and tracks the performance of large international companies, excluding those in the US.
The point of having both of these in a portfolio is that you will be diversified across business sectors and geographies, reducing the chance that problems in the US or any other specific country will drag down your overall portfolio performance.
Those two ETFs focus on stocks. A well-rounded and sufficiently diversified portfolio also needs exposure to bonds to ensure it has a safe source of yield when times get tough, as well as cryptocurrency, as it is not well represented in any other ETF.
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Thus, you can also allocate 10% of the portfolio to the Vanguard Total Bond Market ETF and 5% to the iShares Bitcoin Trust ETF.
In a nutshell, BND is crash insurance. It holds over 17,000 US investment grade bonds with an average annual expense ratio of 0.03%. Its trailing 12-month yield is only 3.9%, but it’s not intended to be a major growth driver for your portfolio anyway.
| A ticker | Security | Finally | Change | change % |
|---|---|---|---|---|
| BND | VANGUARD TOTAL BOND MARKET ETF – USD | 73.78 | -0.23 |
-0.31% |
| IBIT | ISHARES BITCOIN TRUST – USD ACC | 42.51 | -0.74 |
-1.71% |
The Bitcoin Trust position provides real exposure to bitcoin as the name implies. The point of owning it is that it will help you benefit from cryptocurrency’s status as a store of scarce value, and it can help guard your portfolio against inflation as well. It will cost you less than other ETFs, with an average expense ratio of 0.25%, but the potential growth it offers is worth the price.
Not much preparation is required
This portfolio can be popular for many years without any intervention from you. But there is one thing you can do to slightly increase its effectiveness.
VANGUARD FUND TAKES CHINA OUT OF THE EMERGING MARKETS INVESTMENT GAME
Once a year, open your brokerage or retirement account and compare the current weight of each fund to its goal described above.
Pedestrians walk past an American flag displayed outside the New York Stock Exchange in New York on Sep. 12, 2016. (Michael Nagle/Bloomberg via Getty Images/Getty Images)
If any position is down by more than five percentage points from its target share, it is wise to sell a bit of the winner and buy a bit of the laggard. You sell high and buy low, and that’s the whole (mostly voluntary) duty of care. Within a tax-advantaged account like a Roth IRA or 401(k), rebalancing doesn’t cause tax consequences, and many brokerages can even process indexed-weighted portfolios if that’s something you’re interested in.
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Start with whatever amount of money you have, add to your money in the right proportions if you can, rebalance the portfolio once a year and let the market time do all the work. If you are willing to let this money grow, you will probably be better off.
Alex Carchidi has positions in Bitcoin and iShares Bitcoin Trust. The Motley Fool has positions in and recommends Bitcoin, the Vanguard S&P 500 ETF, the Vanguard Total Bond Market ETF, and the iShares Bitcoin Trust. The Motley Fool has a policy of disclosure.
