Build Your Winning Portfolio With 3 ETFs

Let’s talk about something that keeps coming up in conversations with investors: how to build a portfolio that actually works without drowning in complexity. You know the feeling—staring at your brokerage account, wondering if you’ve got too many ETFs, not enough diversification, or just a mess of overlapping holdings. Let’s fix that.

The Core: Start Simple

If there’s one thing I want you to take away, it’s this: simplicity wins. The S&P 500 has historically returned over 10% annually for decades. That’s not bad, right? But here’s the kicker—it’s not just about the return. It’s about consistency.

Broad market ETFs like VOO (Vanguard’s S&P 500 ETF) or SPY are rock-solid foundations. Why? Because they give you exposure to the top 500 companies in the U.S., and their fees are laughably low—VOO charges just 0.03%.

Yes, three-hundredths of a percent. You’re paying pennies to own giants like Apple, Microsoft, and Amazon.

Now, some folks will tell you to go with a total U.S. stock market ETF like VTI instead. Here’s the truth: it’s almost the same thing. VTI holds more companies—thousands instead of hundreds—but guess what?

Over the long term, the returns are nearly identical. The overlap between VOO and VTI is 87%. So pick one. Just one. Don’t overthink it.

Growth: Where to Take Risks

Once you’ve got your core holding, it’s time to think about growth. Maybe you want to juice your returns by adding exposure to high-growth sectors like tech or AI. Fair enough. But here’s where things get tricky.

ETFs like QQQM (which tracks the Nasdaq 100) or SCHG (a growth-focused ETF) have crushed the market over the past decade, averaging close to 18% annually. Sounds great, right?

But hold on. If you already own VOO, you’re already heavily exposed to tech. In fact, 46% of QQQM’s holdings overlap with VOO. What does that mean? You’re not diversifying as much as you think—you’re doubling down on mega-cap tech stocks.

Is that bad? Not necessarily.

But you need to be intentional about it. If you’re okay with that risk, go for it. Just don’t kid yourself into thinking you’re spreading your bets when you’re really stacking them.

Safety: Hedging Your Bets

Now, let’s talk about safety. Markets don’t always go up. Shocking, I know. When things get shaky, defensive plays like dividend-focused ETFs can be your best friend.

SCHD (Schwab U.S. Dividend Equity ETF) or VYM (Vanguard High Dividend Yield ETF) are solid options. They pay you while you wait for the storm to pass. And if you’re nearing retirement, consider adding a bond ETF like BND or a short-term Treasury ETF like SGOV.

These won’t make you rich, but they’ll keep you sane when the market throws a tantrum.

Oh, and here’s a pro tip: don’t forget about sectors like energy or utilities. XLE, the energy sector ETF, was up 1.45% year-to-date when the broader market was down. Sure, energy is volatile, but it’s also uncorrelated to tech-heavy indexes.

Just be careful—95.7% of XLE’s holdings are already in VOO. Adding it doesn’t give you as much diversification as you might think.

The Overlap Trap

Speaking of overlap, let’s clear something up. Redundancy kills portfolios. Holding 20-30 ETFs might sound impressive, but it’s usually a recipe for confusion and inefficiency.

Most investors only need 3-5 ETFs max. Seriously. Use a tool like ETFRC.com to check overlap.

For example, VXUS (an international ETF) has zero overlap with VOO. Perfect, right? Well, not so fast. VXUS has averaged just 5% annually over the past decade.

Is that worth the risk? Maybe not.

On the flip side, Bitcoin ETFs like IBIT offer true non-correlation. Their performance has nothing to do with the stock market. But again, be intentional. A small allocation—say, 5-10%—can act as a hedge.

More than that, and you’re gambling, not investing.

Your Action Plan

Here’s how to simplify your portfolio:

• Step 1: Pick one core ETF (VOO, VTI, or similar).
• Step 2: Add one growth-focused ETF if you want higher returns (QQQM, SCHG, etc.).
• Step 3: Include a safety play (SCHD, VYM, or bonds).
• Step 4: Check for overlap using ETFRC.com and eliminate redundancies.

That’s it. Three to five ETFs. No stress. No second-guessing. Just a clear, purpose-built portfolio designed to weather whatever the market throws your way.

Remember, investing isn’t about chasing every shiny object. It’s about building something that works for you, year after year.

Keep it simple. Stay disciplined. And most importantly, sleep well at night.

After all, isn’t that why we invest in the first place?