Top ETFs Worth Adding to Your Portfolio This Year

Why ETF Diversification Makes Sense Now

Building a balanced portfolio doesn’t have to be complicated. When uncertainty grips the markets and major stocks trade at premium valuations, exchange-traded funds offer a smart way to gain exposure across multiple companies with a single investment. Unlike picking individual stocks, ETFs provide instant sector and geographic spread, reducing risk while maintaining growth potential.

The strategy is particularly compelling when top-tier companies command stretched prices—a situation many would recognize in today’s market landscape.

SCHD: Steady Dividend Income as Your Portfolio Anchor

Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) serves investors seeking predictable income streams. While stock prices fluctuate unpredictably, reliable dividend payments provide a dependable return component.

SCHD tracks the Dow Jones U.S. Dividend 100 Index, which only includes companies meeting rigorous criteria: consistent cash flow generation, fortress-like balance sheets, and a track record of uninterrupted dividend payments stretching back at least a decade. This vetting process ensures the fund holds genuinely high-quality companies—essential for long-term portfolio holding.

Current yield metrics stand at 3.7%, substantially above the fund’s 10-year average and nearly triple what the S&P 500 typically offers. More impressively, SCHD has escalated its distributions by over 160% across the past decade—a compound growth pattern that rewards patient investors through reinvestment acceleration and compounding returns.

Dividends serve double duty in uncertain markets: amplifying gains during uptrends while cushioning drawdowns during corrections.

VXUS: Geographic Diversification Beyond U.S. Borders

Many portfolios concentrate excessively on domestic markets, overlooking a critical diversification principle—geographic spread. Vanguard Total International Stock ETF (NASDAQ: VXUS) addresses this gap by providing exposure to thousands of companies spanning developed and emerging economies worldwide.

Rather than cherry-picking specific countries or regions, VXUS delivers comprehensive international access:

• Europe: 39%
• Emerging Markets: 27.2%
• Pacific Region: 25.4%
• North America: 7.7%
• Middle East: 0.7%

This blend captures the stability associated with mature economies while capturing the growth dynamism of developing markets. You receive both defensive characteristics and expansionary potential from a single holding.

While VXUS lagged the S&P 500 over the past decade—primarily due to American megacap tech valuations surging—it delivered nearly double the index’s returns recently. Given current S&P 500 price levels, international exposure functions as portfolio insurance against potential American market pullbacks.

Sizing Your International Allocation

Most investors maintain a foundation built on the S&P 500, which remains appropriate. However, allocating approximately 10% of your portfolio to best international stocks provides meaningful geographic diversification without overcommitting to non-U.S. securities. This balanced approach captures international upside while preserving domestic market exposure.

Together, SCHD and VXUS create complementary portfolio elements: steady income from proven dividend payers plus growth and inflation hedges from global markets.