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3 ETFs for a Diversified, Low-Cost Portfolio

Morningstar analysts discuss three highly rated exchange-traded funds that could form the backbone of a portfolio.

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Jeremy Glaser: Many investors are looking to simplify their portfolios. We asked Morningstar analysts to provide three low-cost ETFs that could form the backbone of a portfolio.

Adam McCullough: Vanguard Total Stock Market Index Fund, VTI, is an excellent option for investors looking for broadly diversified, market-cap-weighted exposure to the U.S. market. This fund only charges 4 basis points a year for nearly every U.S. stock. It owns 3,600 stocks, but its holdings skew toward the biggest names such as Apple, Amazon, and Microsoft because its holdings are market-cap-weighted. That said, this fund still holds about 7% of its portfolio in small-cap stocks and another 3% in micro-cap stocks. During the past decade through July 2017, this fund topped the U.S. large-cap blend category average by 1.7 percentage points each year with similar risk.

Adam McCullough has a position in the following securities mentioned above: VTI. Find out about Morningstar’s editorial policies.