Exchange-traded funds (ETFs) offer diversification benefits without the need to select individual stocks. Many track indexes like the S&P 500, providing investors with broad market exposure through a single investment.
However, diversification during times of market volatility means looking at funds that go beyond the S&P 500. This could include, for example, precious metals, bonds, and international stocks.
Investing in these sectors may seem scary to investors with a low-risk tolerance. But that’s another benefit of ETFs. By owning a basket of stocks, investors are shielded from the risk of being too concentrated on one individual stock.
With thousands of ETFs available, narrowing down the options can be challenging. This article highlights five thematic ETFs well-suited for current market conditions, offering strong performance and low fees.
Don’t Just Own the S&P 500, Beat It
If you're looking for a set-it-and-forget-it ETF that lets you sleep soundly at night, the iShares Core S&P 500 ETF (NYSE:IVV) is a top choice comparable to the SPDR S&P 500 ETF Trust, which is considered a bellwether among S&P 500 ETFs.
The IVV fund is indexed to the S&P 500. Since 1950, the index has delivered an overall average return of 12%.
In the last 10 years, the IVV ETF has delivered a total return of 232.18%, nearly double the historical average and slightly better than the SPY.
As of March 2025, over 30% of the fund’s weighting was in technology stocks, with each of the Magnificent 7 stocks being among the fund’s top 10 by weight.
When the S&P 500 Isn’t Enough
A fund that tracks the S&P 500 can serve as a good proxy for the stock market.
However, it could leave some gaps and concentrate exposure in areas like technology stocks. A total market fund is an alternative that works for many investors.
The Vanguard Total Stock Market ETFs (NYSE:VTI) is a passively managed fund that tracks the MSCI US Broad Market Index, which covers 99.5% or more of the total market capitalization of all U.S. common stocks.
An interesting point to note is that over the last 10 years, owning VTI would have delivered a total return similar to IVV (211.73% vs. 232.18%), all with an ultra-low expense ratio of 0.03%.
A Fund That Ensures You Pay Yourself First
The Vanguard Dividend Appreciation ETF (NYSE:VIG) is a passively managed fund that tracks an index of dividend-paying companies.
These funds are typically attractive to retirees who are looking for income-producing investments.
However, dividend stocks are looking attractive as many growth stocks are underperforming the market. The VIG lets investors get dividend exposure without selecting individual stocks.
The VIG ETF was up 11% in the 12 months ending March 7, 2025.
Over the last five years, the fund has delivered a total return (stock price appreciation + dividends) of 84.98%. The fund pays an annual dividend of $2.97 per share.
A Safe Landing for a Flight to Safety
Having a diversified portfolio generally means owning different asset classes, such as stocks and bonds.
Bond funds can provide a safe landing for investors looking to park some capital after taking profits from volatile stocks.
The pick here is the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT). The benefit of tracking long-term bonds is that these funds are most sensitive to changes in interest rates.
Although investors may not be getting as many interest rate cuts as they hoped for in 2025, the next directional move is almost assuredly lower.
That flight to safety seems to be already underway. The TLT ETF is up about 4% in 2025, and it could move higher when the Federal Reserve begins to cut rates, probably starting sometime this summer. Investors get that performance with a low expense ratio of just 0.15%.
Last Year’s Golden Opportunity Is Still in Place
Gold was one of the top-performing asset classes in 2024.
And with a mining company like Barrick Gold Corp (NYSE:GOLD) announcing a large share buyback program, there’s good reason to believe that gold is on track for another strong year.
The SPDR Gold Shares ETF (NYSE:GLD) allows investors to gain exposure to the sector without holding physical metal or investing in mining stocks.
Through March 7, 2025, the GLD ETF is up 11.3%, which closely matches the fund’s five-year average annual growth of 11.5%. Investors can get the funds with an expense ratio of just 0.40%.