3 ETFs to Diversify Your Portfolio in 2026

Daniel Sotiroff: After a short hiatus, I’m back. Today, I’m going to share three ETFs that can help diversify your investment portfolio. Now, there are a few different ways to handle diversification. The first is to avoid many of the largest stocks that have been driving the market higher over the past several years. Gold-rated Dimensional US Targeted Value ETF, which trades under the ticker DFAT, is a small-value ETF that does just that. This is a stock ETF, so it will still follow the market’s ups and downs, but it doesn’t hold shares in the largest and most expensive stocks in the market like Nvidia NVDA, Broadcom AVGO, or Tesla TSLA. Instead, this ETF holds a broad range of smaller and cheaper stocks from the mid- and small-cap segments of the market, and it does so in a cost-effective way. It weights the stocks it holds by their market cap to help limit turnover and trading costs, which is an important consideration in the small-cap segment of the market.

This is also an actively managed ETF, so Dimensional’s managers aren’t forced to make any expensive trades that can eat into the ETF’s return.

3 ETFs to Diversify Your Portfolio in 2026

• Dimensional US Targeted Value ETF DFAT
• Fidelity Total Bond ETF FBND
• Vanguard 0-3 Month Treasury Bill ETF VBIL

Bonds are another great way to diversify a stock-heavy portfolio. Gold-rated Fidelity Total Bond ETF, ticker FBND, is one of Morningstar’s favorite core-plus bond ETFs. This is another actively managed ETF. Active managers have reasonable advantages in the bond market, so it’s worth considering from that perspective. Longtime manager Ford O’Neil is leaving his day-to-day management responsibilities at the end of September, but his departure is part of a broader succession plan. We still like the rest of the team that manages the ETF and have confidence that it will continue to perform well over the long haul. This ETF’s sensitivity to interest rate changes should be similar to the Bloomberg US Aggregate Index, but it carries more credit risk. So, think of it as less risky than stocks but a little riskier than an ETF tracking the Bloomberg Agg.

The last ETF for today just turned 1 year old in February. Vanguard 0-3 Month Treasury Bill ETF, ticker VBIL, or “v-bill,” invests in some of the safest financial assets in the world: Treasury bills that mature in three months or less. That means it has great diversification potential. Its yield is closely tied to the Federal Reserve’s policy rate, but there’s little risk beyond that. However, it will come with a much lower rate of return. Full disclosure: This is an ETF that I also own. It’s also one of the cheapest Treasury bill ETFs that’s available. Vanguard charges 0.06% per year for VBIL.

So, hopefully, that gives you a fresh perspective on diversification and some options on how to go about diversifying your portfolio. All three of these are pretty good starting points.

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