Don’t think of the best ETFs for 2026 as an attack plan—think of it as a market preparedness kit.
Exchange-traded funds have become a clear favorite of the “smart money.” According to a recent survey from financial services data and analytics firm ISS Market Intelligence, when asked about how they would invest client assets if a favored manager was available across all types of vehicles, 60% said they preferred ETFs over open-ended mutual funds and separately managed accounts—a huge jump from 49% just a few years ago!
Why? Well, I can think of a host of reasons, but perhaps the two most important are their extraordinary versatility and relatively low fees. Not only can you use ETFs to execute hundreds of strategies across numerous asset classes, but their cost is virtually always lower than any comparable alternatives.
That versatility makes them useful in a wide range of scenarios. Sure, you can put them to work in trends you expect to dominate headlines in 2026. But as we’ve been reminded so far this year, surprises happen! The market doesn’t always move according to plan, so you might also need ETFs that help you roll with those punches. And all the while, you have to keep an eye on the very long term—and ETFs can help you there, too.
Today, I want to introduce you to the best ETFs to buy for 2026. And here’s your annual reminder: This isn’t a list of ETFs everyone should go out and buy tomorrow. Instead, it’s a list of tools that you might either want to stick in your toolbelt right now, or keep in mind for later when you actually need them. Which ones you select will hinge both on your personal investing wants and needs, as well as the factors that ultimately determine the market’s path for the rest of the year.
Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
The Best ETFs for 2026
Near the end of every year, Wall Street’s prognosticators pump out their market outlooks and tell us what they believe will happen in the coming year. And throughout the following year, a couple of funny things always seem to happen:
- Some wild event occurs that throws a lot of those predictions for a loop. COVID. Russia going to war with Ukraine. Rapidly shifting tariff policies.
- Those prognosticators end up being correct in a lot of ways, regardless. Broad S&P 500 price targets aren’t exactly reliable. But you would be amazed how often the “pros” are fairly accurate as it pertains to corporate earnings and emerging themes. In many cases, outside events don’t derail these predictions—they just throw off the timing.
Once you also stop to consider that every single reader has their own long-term investing goals, risk tolerances, and time horizons … well, no best-of list is going to juggle every one of those variables perfectly.
So I don’t bother to try. Rather than exclusively highlight funds that should take off based on market predictions, my annual list gravitates around three types of ETFs:
- Core ETFs: I always like to start with a few core ETFs that, if you don’t already own them, you can buy at pretty much any time and hold on to it—not just for 2026, but a lot longer than that.
- Tactical ETFs: These are the ETFs that deal with experts’ predictions about what will be successful in the year ahead (if not longer).
- Defensive ETFs: These are protective ETFs you might not necessarily buy at the beginning of the year, but that you should be aware of in case you need to play portfolio defense.
So, without further ado, I’ll start this list of the year’s best ETFs to buy with the tactical plays, then move on to the core and defensive funds.
1. Vanguard Russell 2000 ETF
- Type: Tactical
- Style: U.S. small-cap stock
- Assets under management: $13.9 billion*
- Dividend yield: 1.2%
- Expense ratio: 0.06%, or 60¢ per year on every $1,000 invested
What is VTWO?
The Vanguard Russell 2000 ETF (VTWO) is an index fund that provides access to small companies within the Russell 2000 Index.
What does VTWO hold?
This Vanguard index fund is benchmarked to the Russell 2000, a premier small-cap benchmark. The Russell 2000 includes 2,000 of the smallest securities in the U.S. equity market by market capitalization.
Currently, VTWO holds roughly 2,000 predominantly small-cap stocks in the U.S. The fund is market cap-weighted, which means the larger the stock, the greater percentage of assets VTWO will invest in that stock. But unlike with large-cap benchmarks where a few individual stocks can make up dangerously large parts of the portfolio, even the biggest Russell 2000 components—currently connectivity tech company Credo Technology (CRDO), fuel-cell firm Bloom Energy (BE), and optical manufacturing specialist Fabrinet (FN)—make up less than 1% of assets apiece.
Why should you consider VTWO?
Small-cap stocks have largely underperformed their large-cap brethren for most of the past decade. But Wall Street analysts have been broadly positive on diminutive companies as we enter 2026.
“Small caps faced numerous challenges entering ’25, from tariff/Fed uncertainty to a still-elusive EPS recovery,” says BofA Global Research analyst Jill Carey Hall. “But after turning more constructive in August, we are bullish on small caps in 2026, expecting small caps to outperform mid and large caps.”
Among the potential drivers for small caps in 2026, she says, are a long-awaited rebound in profits, continued Federal Reserve rate cuts, the current stage of the capital expenditure cycle, and the potential for lower tariffs and deregulation.
Why VTWO? As is common among Vanguard ETFs, VTWO represents one of the cheapest ways to own both small caps generally, and the Russell 2000 specifically. And it’s even cheaper now than when I first wrote up 2026’s list; Vanguard recently reduced expense ratios on 53 of its funds, including VTWO, whose 7-basis-point annual fee was reduced to just 6 basis points. (A basis point is one one-hundredth of a percentage point.)
* Vanguard fund assets are spread across multiple share classes, including mutual funds and ETFs alike. Assets listed for each Vanguard ETF in this story are for the ETF share class only.
Want to learn more about VTWO? Check out the Vanguard provider site.
Related: How to Invest for (and in) Retirement (Strategies and Investments to Use)
2. State Street Utilities Select Sector SPDR ETF
- Type: Tactical
- Style: Sector (Utilities)
- Assets under management: $24.2 billion
- Dividend yield: 2.7%
- Expense ratio: 0.08%, or 80¢ per year on every $1,000 invested
What is XLU?
The State Street Utilities Select Sector SPDR ETF (XLU) is an index fund that invests in utility-sector stocks within the S&P 500.
What does XLU hold?
The XLU ETF holds all utility-sector stocks in the S&P 500, which includes electric, gas, and water utilities; multi-utilities; and independent power and renewable electricity producers. Right now, that’s a roughly 31-stock set of names including NextEra Energy (NEE), Constellation Energy (CEG), and Southern Co. (SO).
XLU does have some significant single-stock risk—the aforementioned three stocks make up more than a quarter of the fund’s weight, including a 14% allocation to NEE alone. But the sector often moves in lockstep anyways, and you’re being compensated for some risk in the form of a much-higher-than-the-market-average yield.
Why should you consider XLU?
Utility stocks have long been beloved for their defensive nature—they basically operate as pseudo-monopolies delivering electricity, gas, and water that people simply can’t live without. That means fairly steady revenues and profits, which are often paid back to shareholders in the form of larger-than-average dividends.
The sector typically isn’t a font of growth, however, but like I said in 2025, artificial intelligence has driven a lot of excitement in these typically boring stocks, and that’s expected to remain the case in 2026.
“Data centers are improving the outlook for the sector, both for unregulated power producers and regulated utilities,” says Aniket Ullal, SVP and Head, ETF Research & Analytics, CFRA, who points to XLU as a solid way to invest in utilities.
JPMorgan’s research team is maintaining its Overweight (equivalent of Buy) rating on utes “despite a lower beta to the AI theme and the sector being at risk of AI models becoming more energy efficient.” That’s because “the sector has multiple secular growth verticals that should drive steady demand such as EV and reshoring of manufacturing. Importantly, new demand (e.g., overnight EV charging, AI model training) can help levelize electricity needs at night when there is traditionally low-demand, which would in turn translate to higher utilization of the infrastructure and therefore higher margins.”
Yes, XLU is perhaps one of the most boring, staid funds on the market. But for investors unsure which direction the market’s winds will blow, it could be one of the best ETFs to buy for 2026.
Want to learn more about XLU? Check out the State Street Investment Management provider site.
Make Young and the Invested your preferred news source on Google
Simply go to your preferences page and select the ✓ box for Young and the Invested. Once you’ve made this update, you’ll see Young and the Invested show up more often in Google’s “Top Stories” feed, as well as in a dedicated “From Your Sources” section on Google’s search results page.
Related: The 13 Best Mutual Funds You Can Buy for 2026
3. State Street Financial Select Sector SPDR ETF
- Type: Tactical
- Style: Sector (Financials)
- Assets under management: $50.0 billion
- Dividend yield: 1.4%
- Expense ratio: 0.08%, or 80¢ per year on every $1,000 invested
What is XLF?
The State Street Financial Select Sector SPDR ETF (XLF) is an index fund that provides exposure to large financial-sector companies.
What does XLF hold?
State Street’s fund owns the roughly 75 companies in the S&P 500 that fall within the financial sector. This group of large banks, insurers, brokers, and other firms is led by names such as mega-bank JPMorgan Chase (JPM), credit card processors Visa (V) and Mastercard (MA), and insurer/holding company Berkshire Hathaway (BRK.B).
This fund is market cap-weighted, which at the moment creates some significant concentrations in a handful of stocks. Berkshire (12% weight) and JPMorgan (11%) alone account for nearly a quarter of assets.
Why should you consider XLF?
“Trump 2.0” policies were expected to be a boon for the broader financial sector, leading us to recommend a regional-bank ETF. However, a host of other issues tamped down hopes of a big bank party.
That said, the beast may be unleashed in 2026, with the pros citing many of the same reasons.
“Financials will likely benefit from a widening spread between short- and long-term interest rates, deregulation, accelerating M&A activity, plus likely low rates of delinquency and default in their credit portfolios,” the Wells Fargo Investment Institute (WFII) says in its 2026 outlook.
This time around, I’m suggesting the XLF, which is much larger-cap in nature than the regional-bank fund.
Want to learn more about XLF? Check out the State Street Investment Management provider site.
Related: How to Choose a Financial Advisor
4. Global X Robotics & Artificial Intelligence ETF
- Type: Tactical
- Style: Thematic (Artificial intelligence)
- Assets under management: $3.5 billion
- Dividend yield: 0.6%
- Expense ratio: 0.68%, or $6.80 per year on every $1,000 invested
What is BOTZ?
The Global X Robotics & Artificial Intelligence ETF (BOTZ) invests in companies that could benefit—in one of several ways—from advances in robotics and AI technologies.
What does BOTZ hold?
Global X sees robotics and AI having a “wide-reaching application, extending far beyond industrial activity.” BOTZ invests with that in mind, building a somewhat tight portfolio of 60 companies across the globe, and across multiple sectors and industries.
As you might expect, information technology is a significant portion of the fund—but at a weight of 37%, it’s not tops, and it’s less than many other AI ETFs. Instead, industrials lead here, at a little more than half of assets right now. Health care makes up another 10%, with the rest sprinkled across financials, materials, and consumer discretionary names.
Why should you consider BOTZ?
I said a year ago that “as far as artificial intelligence is concerned, the cat is absolutely out of the bag. Chip and software stocks still have growth potential, to be sure, but the whole world knows, and many of these firms are priced for protection.”
That hasn’t changed a bit since then—making it all the more important to be discerning about AI opportunities.
“The AI narrative is changing, with the winners and losers at this stage harder to identify and needing a seemingly endless supply of cash,” says Scott Glasser, Chief Investment Officer at ClearBridge Investments. “Importantly, investors are starting to question the financial returns that this investment will ultimately produce, which has led to market volatility.”
I tend to agree with Global X in its own 2026 outlook.
“The AI ecosystem is likely to remain a compelling investment given the expected impact of automation across the economy,” Global X says. “Exposure to mega-cap tech is important, but other players are critical to the buildout and adoption as well, including Data Centers, Robotics, and Energy Providers.”
Global X’s BOTZ provides that wider-ranging AI exposure (which goes past the tech sector) and could end up being one of the best ETFs of 2026 if the risk-on AI trade continues.
Want to learn more about BOTZ? Check out the Global X provider site.
Related: The 12 Best Vanguard ETFs for 2026 [Build a Low-Cost Portfolio]
5. Invesco Pharmaceuticals ETF
- Type: Tactical
- Style: Industry (Pharmaceuticals)
- Assets under management: $421.8 million
- Dividend yield: 1.0%
- Expense ratio: 0.57%, or $5.70 per year on every $1,000 invested
What is PJP?
The Invesco Pharmaceuticals ETF (PJP) is an industry ETF that provides exposure to pharmaceutical companies within the health care sector.
What does PJP hold?
The PJP tracks the Dynamic Pharmaceutical Intellidex Index (Index), which evaluates pharmaceutical companies based on a variety of criteria, including price and earnings momentum, quality, management action, and value.
This is a tight portfolio of just 30 pharma firms, but it does span the market-cap gamut, resulting in a much lower average holding market cap of about $30 billion versus the category average ($63 billion). Investors enjoy access to true “Big Pharma” names like Merck (MRK) and Eli Lilly (LLY), but also smaller up-and-comers such as Collegium Pharmaceuticals (COLL) and Tarsus Pharmaceuticals (TARS).
Why should you consider PJP?
While health care actually underperformed the market by a few points in 2025, pharmaceuticals took off. And CFRA’s Ullal sees a similarly bifurcated sector in 2026.
“We expect a bounceback in the pharma / biotech sector (other sectors in healthcare like managed care will continue to be under pressure),” he says. “CFRA currently has Buy or Strong Buy ratings on many holdings like Eli Lilly, Amgen, and Merck.”
UBS analysts agree: “Pharma & Biotech stands out for strong momentum, as AI accelerates drug discovery and clinical trial efficiency,” they write.
Rather than own the whole sector, then, the best ETF for 2026 could end up being a more industry-specific play such as PJP.
Want to learn more about PJP? Check out the Invesco provider site.
Related: 15 Best Long-Term Stocks to Buy and Hold Forever
6. Franklin FTSE Japan ETF
- Type: Tactical
- Style: Single-country (Japan)
- Assets under management: $3.1 billion
- Dividend yield: 4.9%
- Expense ratio: 0.09%, or 90¢ per year on every $1,000 invested
What is FLJP?
The Franklin FTSE Japan ETF (FLJP) is an index fund that provides single-country exposure to Japanese equities.
What does FLJP hold?
Franklin’s Japan ETF tracks the FTSE Japan RIC Capped Index, an index of large- and mid-sized companies within Brazil that is “capped” to keep any one stock from exceeding 20% of the fund’s weight. The roughly 490-component fund is currently heaviest in industrials (26%), consumer discretionary (16%), and financials (16%). Top holdings are a who’s who of Japanese blue chips, including Toyota Motor (TM), Mitsubishi UFJ Financial (MUFG), and Sony (SNE).
Why should you consider FLJP?
Last year, I made the case for Brazilian stocks and the Franklin FTSE Brazil ETF (FLBR), which delivered a 45%-plus total return (price plus dividends) in 2025, stomping the S&P 500’s 18% or so.
This year, amid wide analyst bullishness in Japanese equities, I like Franklin’s FLJP for the same reason I liked FLBR: It provides core Japanese stock exposure for a phenomenally dirt-cheap annual fee.
“Japanese equities enter 2026 with supportive political, economic, and policy conditions, underpinned by the new Takaichi administration and strengthened US-Japan ties,” says Amova Asset Management’s Japan equity team.
“Shareholder activism and M&A activity should also continue as Japan’s corporate landscape evolves. The impact of updated M&A guidelines and a more open stance towards unsolicited bids should create more catalysts for value, whether through successful acquisitions or higher competing offers. Taken together, these developments provide a positive backdrop for the Nikkei and suggest 2026 will be another constructive year for Japanese equities.”
Long-term, the best way to invest in the space has been the WisdomTree Japan Hedged Fund (DXJ), which hedges its exposure to the yen and has led the category across virtually all time frames. However, given the landscape going into 2026, “investors seeking a tactical allocation to Japanese equities should seek to do so from an unhedged currency perspective,” says Glenmede’s investment strategy team, led by Jason Pride and Michael Reynolds. “As interest rates in Japan normalize to multi-decade highs, this could provide a notable tailwind for the yen, ultimately enhancing returns from a U.S.-based investor’s perspective.” That could given an edge to unhedged products such as FLJP in 2026.
Want to learn more about FLJP? Check out the Franklin Templeton provider site.
Related: 10 Best Monthly Dividend Stocks for Frequent, Regular Income
7. iShares Core MSCI Emerging Markets ETF
- Type: Tactical
- Style: Emerging-market stock
- Assets under management: $148.6 billion
- Dividend yield: 2.6%
- Expense ratio: 0.09%, or 90¢ per year on every $1,000 invested
What is IEMG?
The iShares Core MSCI Emerging Markets ETF (IEMG) is a dirt-cheap index fund that invests in stocks located in emerging-market countries.
What does IEMG hold?
International stocks tend to be divided into two camps:
- Developed markets: More established economies with well-regulated capital markets and stable politics; typically slower-growing. (See: Japan above.)
- Emerging markets: Faster-growing but less established economies that may have more volatile capital markets and more tumultuous political climates.
This Vanguard ETF focuses on the latter; it tracks the MSCI Emerging Markets Investable Market Index, which owns large-, mid-, and small-cap stocks across emerging-market countries.
The portfolio currently boasts nearly 2,700 companies across a couple dozen countries, though it’s more heavily concentrated in China (23%), Taiwan (22%), South Korea (17%), and India (14%). And while IEMG holds stocks of all sizes, it’s market cap-weighted, which means the highest allocations go to mega-cap companies including Taiwan Semiconductor (TSM), China’s Tencent (TCEHY), and South Korea’s Samsung.
Why should you consider IEMG?
Emerging markets (EMs) are well-known among investors for being a source of high growth, and several analysts are bullish on EMs’ prospects for the new year.
“EM equities are poised for strong performance in 2026, supported by lower local interest rates, higher earnings growth, attractive valuations, further improvement in corporate governance, healthier fiscal balance sheets and resilient global growth,” JPMorgan’s Rajiv Batra and Emy Shayo Cherman write in their company’s 2026 outlook. “We forecast 18% upside in the base case (MSCI EM at 1,575) driven primarily by earnings growth, which we expect at double digits, in-line with consensus.”
While this is categorized as a “tactical” fund, CFRA’s Ullal makes the case for IEMG as a “core” fund, too. “Many U.S. investors tend to have a U.S. home bias, particularly due to the artificial intelligence trade,” he says. “However, emerging markets can provide diversification benefits and access to international growth.”
IEMG in specific is one of the least expensive ways to get emerging-market exposure, at just 9 basis points annually. In fact, it was created back in 2012 as a less-expensive version of its sister fund, the iShares MSCI Emerging Markets ETF (EEM), once the predominant EM fund but much more expensive at 0.72% in annual fees. Today, IEMG boasts more than five times the assets held in EEM.
Want to learn more about IEMG? Check out the iShares provider site.
Related: 9 Best Fidelity ETFs You Can Buy [Invest Tactically]
8. WisdomTree China ex-State-Owned Enterprises Fund
- Type: Tactical
- Style: Single-country (China)
- Assets under management: $568.2 million
- Dividend yield: 1.9%
- Expense ratio: 0.32%, or $3.20 annually on a $1,000 investment
What is CXSE?
The WisdomTree China ex-State-Owned Enterprises Fund (CXSE) is an index fund that owns the stocks of Chinese companies that aren’t state-owned.
What does CXSE hold?
CXSE holds about 260 companies in which the Chinese government has little to no ownership stake. Despite the name, the fund doesn’t fully exclude any company tied to the government—WisdomTree’s threshold for government ownership is 20% or more.
The fund has a modified float-adjusted market cap weighting system, so while a larger company size generally means a greater weight, it’s not an exact one-for-one like it is with other funds.
Consumer discretionary stocks are chief here at nearly 30% of assets, followed by information technology at nearly 20%, and communication services around 15%. Top holdings right now include tech conglomerate Tencent, e-commerce giant Alibaba (BABA), and Ping An Insurance Group.
Why should you consider CXSE?
Chinese stocks popped off in 2025, and several analysts are looking for China to repeat again in the coming year.
“We expect another positive year ahead for the Chinese equities as many of the favourable drivers from 2025 should continue to support the market including: 1) advancement in innovations, in particular AI; 2) accommodative policy for private enterprises and capital markets; 3) sustained fiscal expansion and ample liquidity under an easy monetary policy setting; and 4) potential inflows from domestic and foreign institutional investors,” UBS strategist James Wang says. That said, these same factors are unlikely to lift valuation multiples to the same extent as this year, and we expect the share price performance for 2026 to be driven more by earnings.”
UBS specifically prefers internet, hardware tech, and broker names—and for that reason, I’m selecting CXSE, which has higher exposure to these themes compared to competing funds while still remaining pretty well diversified.
Want to learn more about CXSE? Check out the WisdomTree provider site.
Related: 7 Best Index Funds for Beginners
9. JPMorgan Active Bond ETF
- Type: Tactical
- Style: Intermediate core bond
- Assets under management: $6.6 billion
- SEC yield: 4.3%*
- Expense ratio: 0.25%, or $2.50 annually on a $1,000 investment
What is JBND?
JPMorgan Active Bond ETF (JBND) is an actively managed bond ETF that typically focuses on higher-quality, intermediate-term debt. However, unlike an indexed bond fund that will simply hold whatever bonds qualify for inclusion in a benchmark index, management will tailor portfolio decisions, taking on greater or lesser risk depending on the market environment.
What does JBND hold?
The ETF’s managers—Richard Figuly, Justin Rucker, Andy Melchiorre, and Edward Fitzpatrick—currently spread their assets across more than 1,500 holdings. JBND is most heavily invested in Treasuries and futures, which combine to make up a little more than 40% of JEPI’s assets. Agency mortgage-backed securities (MBSes) are another quarter or so, investment-grade corporates are 14%, and asset-backed securities (ABSes) are about 11%. The remainder is scattered across commercial mortgage-backed securities (MBSes), non-agency MBSes, non-corporate credit, and other debt.
The portfolio’s average effective maturity (how long until the bonds mature) is 6.4 years, while average effective duration (a measure of risk) is 6.1 years, implying that for every 1-percentage-point increase in market interest rates, the fund would experience a short-term decline of 6.1%, and vice versa. Lastly, credit quality is exceptional—virtually the entire portfolio boasts investment-grade ratings, and almost 65% enjoy the highest possible rating of AAA.
Why should you consider JBND?
The Federal Reserve spent the late innings of 2025 lowering the target range for its benchmark interest rate. And more could be on the way.
“It’s a theme in the sense that the Fed is reducing rates and investors are looking to support higher income,” says Jon Maier, Chief ETF Strategist, Managing Director, JPMorgan Asset Management. “We are seeing a large amount of flows going into our fixed-income funds in general. Investors are trying to move a little bit out on the duration spectrum to pick up the yield they’re not receiving on the short end of the curve.
“There are also so many benefits to using an active manager for fixed income, and then there are benefits to using the ETF structure with an active manager, just because [bonds are] a largely active market.”
* SEC yield reflects the interest earned across the most recent 30-day period. This is a standard measure for funds holding bonds and preferred stocks.
Want to learn more about JBND? Check out the JPMorgan Asset Management provider site.
Related: 7 Best High-Yield Dividend Stocks: The Pros’ Picks
10. State Street SPDR Portfolio S&P 500 ETF
- Type: Core
- Style: U.S. large-cap stock
- Assets under management: $107.2 billion
- Dividend yield: 1.1%
- Expense ratio: 0.02%, or 20¢ annually on a $1,000 investment
What is SPYM?
The State Street SPDR Portfolio S&P 500 ETF (SPYM) is an index fund that tracks the S&P 500: America’s chief stock-market index, made up of publicly traded stocks representing 500 of the largest U.S.-listed companies.
What does SPYM hold?
The SPDR Portfolio S&P 500 ETF holds the 500 companies in the S&P 500 index—a collection of predominantly large-cap companies. That means it offers exposure to all 11 market sectors, but it doesn’t do so evenly. Right now, technology is the biggest industry weight at 34% of SPYM’s assets, followed by financials (12%), consumer discretionary (10%), and communication services (10%). However, utilities, real estate, and materials each account for less than 3% of assets.
The reason for this imbalance? The S&P 500 is a market cap-weighted index, which means the larger the stock, the more influence it has—and tech contains some of the biggest companies in the world, including multitrillion-dollar firms Nvidia (NVDA), Apple (AAPL), and Microsoft (MSFT).
Just remember: What’s big today might not be big tomorrow. Stock weights always change, so the S&P 500’s sector weights commonly change over time as the economy evolves.
Why should you consider SPYM?
Financial advisors frequently recommend that you make an S&P 500 tracker—any index fund that replicates the performance of the S&P 500—part of your portfolio’s core. That’s in part because the S&P 500 gives you exposure to a diversified list of 500 blue-chip companies, which provides a balance of growth and income potential.
But that’s also because, if you’re looking for that kind of large-cap exposure, index funds typically do better than your average human manager. According to S&P Dow Jones Indices, 86% of large-cap funds have underperformed the S&P 500 over the trailing 10 years; that number creeps up to 88% if you look at the trailing 15 years.
“I know guys that rate active managers in all these categories, and even they’re like, ‘I’m not buying actively managed large blend; I’m just indexing’ because it’s so brutally tough to beat a dirt-cheap index fund in the large blend category,” says Daniel Sotiroff, Senior Analyst for ETF and Passive Strategies at Morningstar.
There are only a handful of S&P 500 ETFs, but combined, they account for more than $2 trillion in assets. State Street’s SPYM is by far the smallest, at a little more than $100 billion in assets. So, why opt for the little guy?
If literally all else is equal, lower fees will equal better performance. And as of right now, it doesn’t get cheaper than SPYM. “State Street recently lowered the fees on this ETF (along with a ticker change), making it the cheapest of the S&P 500 ETFs,” Ullal says.
Editor’s note: The SPDR Portfolio S&P 500 ETF (SPLG) was renamed the State Street SPDR Portfolio S&P 500 ETF, and given the new ticker SPYM, effective Oct. 31, 2025.
Want to learn more about SPYM? Check out the State Street Investment Management provider site.
Related: The Best Dividend Stocks: 10 Pro-Grade Income Picks for 2026
11. Vanguard Wellington Dividend Growth Active ETF
- Type: Core
- Style: U.S. dividend-growth stock
- Assets under management: $23.2 million
- Dividend yield: 1.0%*
- Expense ratio: 0.40%, or $4.00 annually on a $1,000 investment
What is VDIG?
The Vanguard Wellington Dividend Growth Active ETF (VDIG) is a large-cap fund that holds high-quality companies that increase their dividends over time.
What does VDIG hold?
Unlike index funds that have strict dividend-growth criteria for inclusion, Wellington Management’s Peter Fisher has discretion to build his own portfolio—but the fund’s holdings “typically (but not always) are large-cap, undervalued relative to the market, and show potential for increasing dividends.”
Currently, Fisher runs a very tight portfolio of 32 dividend-growth stocks—including names such as Broadcom (AVGO), Eli Lilly (LLY), and Mastercard (MA)—that boast varying lengths of payout-improvement streaks.
Why should you consider VDIG?
“If you’re looking for a core large blend building block, [VDIG] lands smack-dab in the middle of the style box,” Sotiroff says. “It’s a very high-conviction portfolio. But we have a lot of experience with that strategy in mutual fund form, we’ve been big fans of it for a long while now.”
But while VDIG might be similar to the other funds Fisher manages—specifically, Vanguard Dividend Growth Fund (VDIGX) and Vanguard Advice Select Dividend Growth Fund (VADGX)—it’s not an exact clone.
“We really like the manager,” Sotiroff says. “He’s taking over for Donald Kilbride, who managed the strategy for something like 20 years. It has a really good track record, and because it’s a dividend-growth strategy, it won’t be leaning heavily into those overpriced tech names. It’ll be a little more value-oriented in that regard. So if there is a big blowup from these big tech companies trading at extreme valuations, this should hold up pretty well.”
* VDIG, which was launched in November 2025, pays dividends annually. The yield has been calculated by extrapolating the 2025 distribution across a full year.
Want to learn more about VDIG? Check out the Vanguard provider site.
Related: The 10 Best ETFs for Beginners [2026]
12. Distillate U.S. Fundamental Stability & Value ETF
- Type: Core
- Style: U.S. value stock
- Assets under management: $1.9 billion
- Dividend yield: 1.3%
- Expense ratio: 0.39%, or $3.90 annually on a $1,000 investment
What is DSTL?
The Distillate U.S. Fundamental Stability & Value ETF (DSTL) is a value fund—that is, it holds stocks that are relatively undervalued compared to other stocks. But what sets DSTL apart is how it determines value.
What does DSTL hold?
DSTL builds its portfolio by taking a universe of the 500 largest U.S. companies, then eliminating any stocks deemed expensive by free cash flow/enterprise value, as well as any companies with either high debt, volatile cash flows, or both. The resultant 100-stock portfolio doesn’t look a thing like traditional value funds, with health care (25%), technology (21%), and industrials (17%) dominating the portfolio.
Most value funds measure value by metrics such as price-to-earnings (P/E), price-to-sales (P/S), and even price-to-book (P/B). But the Distillate ETF focuses on free cash flow (FCF)—whatever profits are left once a company makes operating and capital expenditures needed to maintain the business—divided by enterprise value (EV), a measure of company size that takes market capitalization, then factors in debt owed and cash on hand.
Why this lesser-used metric? Thomas Cole, CEO and co-founder of Distillate Capital, explains that while many accounting measures, including earnings and even revenues, can be “adjusted,” you can’t adjust cash. Cash is just cash.
Why should you consider DSTL?
For one, it works. Distillate’s value ETF came to life in late 2018. It has delivered a 176% total return since then, outperforming the CRSP US Large Cap Value Index by 42 percentage points.
DSTL didn’t fare as well in 2025, underperforming by about 7 percentage points, but relative valuations are setting the ETF up for a more productive 2026.
“The S&P 500, on a free cash flow basis, has only been more expensive than it is right now in the very late innings of the [dot-com bubble]. And that’s our preferred metric,” Cole says. “But we looked at [valuations] in a number of different ways, and if you take the available history of whatever series you use—reported earnings, operating earnings, EBITDA, whatever—you’re still in the 90th or more percentage in terms of percentile of valuation. The market’s expensive. And not only has the S&P 500 hardly ever been more expensive than it is now, but the value benchmark is also pretty expensive with some of the industrials and utilities getting caught up in the AIR run.
“But curiously, our 100-stock large-cap portfolio still has the absolute level of free cash flow yield that it did in 2017. It’s actually a little higher than it was back then. So you know, it tells you there’s good value below the surface.”
Want to learn more about DSTL? Check out the Distillate Capital provider site.
Related: 10 Best Fidelity Funds to Buy
13. iShares LifePath Target-Date ETFs
- Type: Core
- Style: Target-date
- Assets under management: $497.6 million*
- Dividend yield: Varies by fund
- Expense ratio: 0.08%-0.12%, or 80¢-$1.20 annually on a $1,000 investment
What are the iShares LifePath Target-Date ETFs?
We’re only counting them as one, but the iShares LifePath Target-Date ETFs are actually a series of funds.
Target-date funds are an all-in-one retirement investment solution that you can theoretically buy at any time, then hold until you retire (or, often, keep holding through retirement). Each target-date fund will be attached to a date the holder is targeting to retire, usually in five-year increments—so, a target-date fund provider will have funds for 2040, 2045, 2050, and so on. For each fund, the manager will own a combination of stock and bond funds, and adjust how much of each they hold over time. These funds typically start aggressively (more stocks than bonds), but the closer the fund gets to the target date, the more conservative the manager gets, buying more bonds and selling more stocks.
iShares’ LifePath series currently has nine target-date funds (2030 through 2070), as well as a retirement ETF that’s meant for people who are very close to or already in retirement.
What do the iShares LifePath Target-Date ETFs hold?
Each LifePath ETF holds more or less the same funds, just in different concentrations. But we’ll use the iShares LifePath Target Date 2045 ETF (ITDE) as an example. It’s currently 85% invested in stocks, and 15% invested in bonds and cash. It does this by holding other iShares ETFs, including the iShares Russell 1000 ETF (IWB, large- and mid-cap U.S. stocks), iShares Core MSCI International Developed Markets ETF (IDEV, developed-market international stocks), and iShares 10+ Year Investment Grade Corporate Bond ETF (IGLB, investment-grade corporate debt), among others. Over time, more of its assets will be invested in bond funds, and fewer of its assets will be invested in stock funds.
The iShares LifePath Target Date 2070 ETF (ITDJ), by comparison, is 98% invested in stocks, and just 2% invested in bonds and cash.
Why should you consider iShares LifePath Target-Date ETFs?
The iShares LifePath Target-Date ETFs, which launched in October 2023, are the only target-date ETFs in existence (for now). All other target-date products are mutual funds, and most people invest in them through 401(k)s and other employer-sponsored retirement plans.
But you can buy LifePath ETFs in any kind of account—even plain ol’ brokerage accounts. That makes them an exceedingly flexible product for investors doing their retirement planning.
“It doesn’t make sense for [investors with advisors] because they don’t want to pay an advisor just to own one ETF,” says Todd Rosenbluth, Head of Research & Editorial, TMX VettaFi. “But if you’re doing this on your own and you have a plan in mind, [the iShares target-date ETFs] are good products.”
* Assets listed are across all LifePath ETFs.
Want to learn more about the LifePath target-date ETFs? Check out the iShares provider site.
Related: Best Target-Date Funds: Fidelity vs. Schwab vs. T. Rowe vs. Vanguard
14. iShares MSCI USA Min Vol Factor ETF
- Type: Defensive
- Style: U.S. minimum-volatility stock
- Assets under management: $23.3 billion
- Dividend yield: 1.5%
- Expense ratio: 0.15%, or $1.50 annually on a $1,000 investment
What is USMV?
The iShares MSCI USA Min Vol Factor ETF (USMV) is an index ETF that invests in a portfolio of companies that in aggregate is less volatile in nature than the broader U.S. equity market.
What does USMV hold?
To understand USMV’s portfolio, it’s helpful to know the difference between “low volatility” and “minimum volatility.”
Both strategies are designed to reduce volatility, but they do so in two starkly different ways. Low-vol funds simply hold the lowest-volatility stocks within their selection universe. Min-vol funds try to create the lowest-volatility portfolio possible, even if doing so involves owning some volatile stocks. (How would that work? If you own several stocks that are volatile, but whose performances aren’t really correlated with one another, they could balance each other out to an extent, creating a portfolio that overall doesn’t exhibit much volatility.)
The iShares minimum-volatility ETFs start with an MSCI market index. They look at volatility on a single-stock level, but they also analyze correlations between stocks, sectors, and (where applicable) countries. They also constrain sectors and countries to within 5% of their weighting in the index—so, if consumer staples made up 10% of the index, it could make up no more than 15% and no less than 5% of the fund’s holdings. From there, they optimize the portfolio to create a minimum-volatility index.
The iShares MSCI USA Min Vol Factor ETF holds 170 U.S. stocks that, from a sector perspective, are pretty similar in balance to the S&P 500. Technology stocks are best represented, followed by health care and financials. Past that, the ordering differs, but every sector weight is still within just a few percentage points of not just its underlying index (the MSCI USA Index), but the S&P 500, as well.
Why should you consider USMV?
Market volatility usually goes hand-in-hand with big drops in stocks. So, naturally, low- and min-volatility ETFs are considered a smart way to hedge against a downward swing in the market.
“We really like the iShares min-vol ETFs,” Morningstar’s Sotiroff says. “If you want just a defensive equity portfolio, those are pretty good to go with. They consistently show up when you go into a drawdown and perform how you would expect.”
But you should be aware of the risk of owning any low- or min-vol product.
“When the market just keeps going higher and higher, they don’t look all that great,” Sotiroff says. “Some people don’t understand there’s a tradeoff—you’re not going to participate [as much] in the upside. So they’re very good as defensive ETFs, but that’s also their shortfall.”
Want to learn more about USMV? Check out the iShares provider site.
Related: 9 Best Dividend Stocks for Beginners
15. ProShares Short S&P500
- Type: Defensive
- Style: Inverse stock
- Assets under management: $1.0 billion
- Dividend yield: 4.5%
- Expense ratio: 0.89%, or $8.90 annually on a $1,000 investment
What is SH?
The ProShares Short S&P500 (SH) is a fund that, very simply put, goes up when the market goes down. More specifically, it provides the inverse daily return of the S&P 500, which means if the S&P 500 declines by 1% on Monday, SH will gain 1% (minus expenses) on Monday.
What does SH hold?
This is the most complicated portfolio of any fund on this list. SH primarily holds a number of futures, swaps, and Treasury bills to replicate the inverse-S&P 500 performance it’s looking for. While the average investor should always “look under the hood” in any ETF they buy, in this case, doing so will be more confusing than educational.
Why should you consider SH?
“Always have an escape plan.” It’s a sentimental line delivered by Desmond Llewellyn’s Q during his farewell in The World Is Not Enough … and it’s darn fine advice for any tactical investor.
One of the best ways to avoid deep losses in stocks is to not own stocks, but if you’re reading this, you probably don’t want to sell your stocks. For one, you would lose any attractive “yields on cost” (the actual dividend yield you receive from your initial cost basis) on stocks you’ve owned for a while. And if you time the market wrong, you could miss the rebound.
One alternative? Hedge the market by buying shares of SH if you think the market is in for pain. If you’re right, you can offset some of the losses that your long holdings might incur during a down market—like many investors were rewarded for doing in February 2020 when it became apparent that COVID-19 was going to hit the U.S.
SH has its own risks. For one, that inverse exposure is only on a daily basis—over a long period of time, it’s not a perfect 1-for-1 relationship. The fund could, for instance, go up 8% across a year in which the S&P 500 declines 10%. And naturally, if your stocks go up, your portfolio’s gains won’t be as great as they would’ve been.
But it’s a better risk than jettisoning your stocks. And it’s a more manageable hedge than inverse leveraged ETFs. Still, only tactical investors with high risk tolerance should consider this ETF.
Want to learn more about SH? Check out the ProShares provider site.
Related: The 10 Best ETFs to Beat Back a Bear Market
16. JPMorgan Equity Premium Income ETF
- Type: Defensive
- Style: Covered call
- Assets under management: $44.4 billion
- Dividend yield: 8.1%
- Expense ratio: 0.35%, or $3.50 annually on a $1,000 investment
What is JEPI?
The JPMorgan Equity Premium Income ETF (JEPI) is an actively managed ETF that generates income by selling covered calls: an income-generating options strategy in which an investor sells call options on a stock or fund while owning an equivalent amount of shares of that stock or fund. In JEPI’s case, the strategy centers around the S&P 500 Index.
What does JEPI hold?
Managers Hamilton Reiner, Raffaele Zingone, Matt Bensen, and Judy Jansen have built a portfolio of about 125 stocks within the S&P 500. They also write approximately 2% out-of-the-money call options on the S&P 500 Index. “It’s a quarter every week,” JPMorgan Asset Management’s Maier says. “A quarter of the portfolio is rewritten for a month, and then a week later, a month. So it’s staggered.”
Why should you consider JEPI?
In short, when you sell covered calls, you receive a premium for selling the call options. If the underlying asset’s price rises above the call price at some point before the option expires, you’ll likely be assigned, and your shares will be called away. If the price remains below the call price, the option will expire worthless. Either way, you keep the premium. The ultimate effect of this strategy is that you constantly generate income while protecting against downside in the assets you hold, though you limit the amount of upside you can enjoy.
With JEPI specifically, “the underlying portfolio is managed with lower volatility than the S&P 500. So when you have the option overlay, combined with the underlying lower-volatility portfolio, it provides volatility that’s about 60% of the S&P 500 and yields between 7% and 9%,” Maier says.
“We spent a lot of time looking at covered-call funds. It’s one of those areas where there’s a market for this, but a lot of this has gotten out of control,” Sotiroff adds. “But the JEPI ETF, we actually rated that, and within that category (derivative income), that’s one we like. It’s pretty reasonably structured, there’s a defensive element to the underlying stock portfolio, it’s not doing anything crazy with the options.”
In other words, JEPI could be one of the best ETFs to buy for 2026 and for years to come … if you need defense. But this isn’t necessarily an appropriate buy-and-hold-forever investment for most people.
Want to learn more about JEPI? Check out the JPMorgan Asset Management provider site.
Related: 7 Best High-Dividend ETFs for Income-Hungry Investors
