I Used to Funnel All of My Savings into VOO, But These 3 ETFs Offer a More Balanced Approach

The Vanguard S&P 500 ETF (VOO) remains one of the top exchange traded funds (ETFs) in the market, and for good reason. This is a fund that continues to be a go-to investment for those seeking broad market exposure with low fees. I’m also one who has touted VOO as an excellent way for passive and active investors alike to gain broad exposure to the market in my previous pieces.

That said, there’s also some credence that investors need to give to the idea that holding any individual ETF (no matter how diversified and low-cost it is) can leave a portfolio vulnerable to wide-ranging market risks. Indeed, given the moves we’ve seen in the market lately, investors have good reason to look to other options as a way to hedge against risk and uncertainty, and navigate what appear to be choppy waters ahead.

Below, I’m going to highlight three ETFs I think can provide investors with the kind of broader diversification and relative defensiveness in this current market. Beyond VOO, these are three of the top ETFs I’ve got on my radar right now. 

iShares Core Moderate Allocation ETF (AOM)

The iShares Core Moderate Allocation ETF (AOM) is a well-balanced ETF structured for investors seeking a more moderate risk profile in their portfolios. This ETF specifically provides a mix of equities and other fixed-income assets, generally flowing through to a more traditional 60/40 portfolio mix (60% equities and 40% bonds) many older investors may be after.

If we are due for a continued pullback from here, that could induce an environment in which bonds outperform equities. If that’s the case, this is such an ETF that would certainly outperform relative to an ETF that’s much more heavily weighted toward stocks.

AOM currently offers this diversification at a very attractive expense ratio of 0.15%, and is a leading option for those seeking U.S. and international exposure for both stocks and bonds. For those looking for a more moderate option in this period where risk-off could be the strategy that wins (but still retain upside to the market when it rallies), this is a great ETF in my books. 

Vanguard Total Stock Market ETF (VTI)

Like VOO, the Vanguard Total Stock Market ETF (VTI) is a top choice for investors seeking broad market exposure in the most cost effective way possible. This particular ETF tracks perhaps the broadest range of U.S. stocks, with more than 3,700 stocks held within this fund among small, mid and large-cap companies.

Again, I think this market environment is one that’s clearly benefited investors who have traversed into the world of fixed equities, and who may be looking to continue to add exposure outside of the stock market. However, I still think nearly all investors should have some exposure to the stock market. It’s been one of the best inflation hedges over the long-term, and one of the best ways for individuals to keep as many of their dollars in their pockets over time on a inflation-adjusted basis.

Until that changes, VTI appears to be an excellent option providing near-maximum returns via its ultra-low expense ratio of 0.03%. 

JPMorgan Core Plus Bond ETF (JCPB)

Okay, back to the bond discussion. 

The JPMorgan Core Plus Bond ETF (JCPB) is a compelling option for investors looking for the other half of their portfolio allocation – bonds. This fund is highly diversified, providing active management along with very solid risk-adjusted returns over the long-term.

Now, this active management feature of this particular ETF does mean that JCPB carries with it a higher expense ratio than many passive investors may like, at 0.38%. However, with roughly half of this ETF’s holdings rated AAA, the focus is clearly on the highest-quality assets generating excess yield over Treasurys. Thus, for investors looking to get into the bond market (and want to own the highest quality assets in this space), this is the fund I’d encourage such investors to look at. 

Over the long-term, I think the capital appreciation upside of this ETF (assuming interest rates continue to trend toward zero), its solid income (yield of more than 5%) and long-term stability this fund provides for individual portfolios makes it worth a look here.