In 2026, I’m planning to focus on ETFs, and these are at the top of my buying list.
I’ve been investing actively for about 15 years, primarily concentrating on building individual stock portfolios. There are valid reasons for this approach; it’s indeed possible to outperform the market by targeting strong businesses and holding on to those stocks as long as they remain robust. That’s pretty much how investors like Warren Buffett and others have amassed their fortunes.
However, as I’ve matured in this journey, my attention has shifted toward exchange-traded funds (ETFs). Sure, I still pick individual stocks, but I’m trying to create a more solid “backbone” for my portfolio—something that will perform well in the long run and lessen the reliance on the performance of single companies.
Interest rates can unlock value
Typically, the real estate sector shines when interest rates are low, and I anticipate that both long-term and short-term interest rates will decline across the board in 2026. As a result, I plan to add the Vanguard Real Estate ETF to my portfolio.
Today’s changes
(0.17%) $0.15
current price
$89.44
Key data points
daily range
$89.43 – $90.01
52 week range
$76.92 – $94.95
volume
176K
Lower interest rates generally benefit real estate investment trusts (REITs) for several reasons.
- First off, cheaper borrowing costs make it easier for REITs to purchase properties.
- Additionally, when interest rates drop, investors often move their money from safer accounts into “riskier” high-yield assets like REITs.
- More subtly, a lot of a commercial property’s value is influenced by interest rates. I won’t delve deep into financial metrics, but simply put, real estate tends to hold higher value in a low-interest-rate environment.
The Vanguard Real Estate ETF offers exposure to REITs with a low expense ratio of 0.13%. It’s a strong option for income-focused investors, and with interest rates potentially falling, it could offer impressive returns.
2026: The year small-cap stocks could shine?
Small-cap stocks are currently trading at their lowest valuations compared to large-caps since the late 1990s. There are understandable reasons for this, like the dominance of mega-cap tech companies and the investment boom surrounding artificial intelligence (AI). However, I believe this situation might have swung too far. The average small-cap stock in the Russell 2000 trades at about 2.1 times book value, while an average S&P 500 company boasts a valuation of over 5 times book value.
The ETF I invested the most in 2025 was the Vanguard Russell 2000 ETF. I intend to keep adding to my position as I head into 2026.
With its low expense ratio of 0.07% and comprehensive small-cap exposure, the Vanguard Russell 2000 ETF has the potential to perform exceptionally well in 2026 and beyond. In fact, the last time large and small-cap valuation gaps were similar, small-cap stocks thrived for over a decade.
AI trends likely to persist beyond 2026
There’s trillions being funneled into AI infrastructure, and the tempo of this investment is ramping up as we approach 2026. That said, I’ve already secured some exposure to mega-cap AI companies through other index funds, and assessing individual AI firms isn’t my forte. Hence, I like the ETF route.
In 2026, I’m specifically eyeing the Ark Autonomous Technology and Robotics ETF, an actively managed fund curated by noted tech investor Cathie Wood.
This ETF catches my attention as it targets a selection of stocks likely to benefit significantly from the AI revolution, without concentrating solely on mega-cap companies. It excludes giants like Nvidia from its top holdings while including names like Teradyne, Kratos Defense & Security, and aviation environment.
If you aren’t aware of these, that’s fine. The Ark Autonomous Technology and Robotics ETF is designed to give access to some of the standout companies poised to be significant winners in AI, aiming for returns that beat AI benchmarks.
A solid pick for 2026 and beyond
Let me clarify—I intend to purchase shares in all three of these ETFs as part of a long-term strategy. It’s not merely about their potential to outperform in 2026. There’s no certainty that interest rates will drop or that there won’t be overall economic weaknesses in various sectors.
However, long-term investors who manage to snag these three ETFs at current prices could see positive results. That’s why I’m planning to add all three this year.
