Vanguard FTSE 250 ETF (VMID)
The case for this ETF is pretty straightforward: it’s large and liquid, charges just 0.1 per cent and focuses on a market cap segment that is yet to rebound as strongly as the FTSE 100. Some may even view it as a core holding instead.
SPDR S&P UK Dividend Aristocrats ETF (UKDV)
Some of the funds in our Satellite category aim for a certain outcome, and attempt to do this via varying methods. This ETF demonstrates that pretty clearly.
UKDV entered the list in 2020. Then, as now, we liked the fact that it takes a defensive approach to income investing rather than simply chasing yield. The fund’s underlying index focuses on a cohort of high-yielding UK companies, but in order to be included they must have increased or maintained their dividends for at least seven years in a row.
This adds a defensive profile to the fund, but means that certain big income stocks are absent from the portfolio. Take BP (BP.), which cut its dividend during the pandemic, as one example.
We like the fact that the strategy is somewhat differentiated from the likes of a FTSE 100 tracker. But we should note that it has lagged both the FTSE 100 and its higher-octane rival, the iShares UK Dividend ETF (IUKD), in recent years.
Recent performance has been decent, however. The fund has returned more than 16 per cent in the 12 months to the end of June 2025. It comes with a 3.8 per cent dividend yield, has big allocations to industrials and financials, and counts Legal & General (LGEN), LondonMetric Property (LMP), Schroders (SDR) and the soon-to-be-acquired Spectris (SXS) among its top holdings.
SPDR Russell 2000 US Small Cap ETF (R2SC)
With a handful of the biggest companies dominating the US equity market, we use our Satellite category to highlight names offering some diversification from this.
This fund continues to do that well, given its focus on US small caps. It charges 0.3 per cent, a fairly competitive fee for a more specialist ETF, and has a good level of scale.
It is also rigorously diversified, with more than 1,600 holdings, something that might help to offset the risks involved in investing further down the market cap spectrum, and has a spread of different sector allocations. The biggest position in the fund amounts to just 0.6 per cent of the portfolio.
Investing in US smaller companies may seem like a risky prospect at a time of upheaval for the nation, and those willing to take the plunge might feel better using an active fund. But this ETF still stands out as an option.
iShares S&P 500 Equal Weight ETF (EWSP)
We introduced this fund to the list in 2023 as a more nuanced way to access a Magnificent Seven-heavy index. It holds all the constituents of the S&P 500, but gives each company roughly the same allocation. The theory goes that the fund is therefore less prone to a sell-off in the S&P’s biggest constituents, although critics argue that it misses the upside generated by such companies and may suffer in a bear market anyway.
It has a low fee of 0.15 per cent and plenty of scale, but what of performance? The fund has lost around 5 per cent in sterling terms in the first half of 2025, slightly worse than the 4.2 per cent fall for the S&P. Meanwhile, it returned around 14.5 per cent in 2024, compared with 25.5 per cent for the S&P.
Avoiding the US market leaders comes with a lot of opportunity cost, but investors don’t have to take an all-or-nothing approach. As one panellist suggested last year, they could in fact hold the equal-weight fund alongside a conventional S&P tracker as a way of adding some diversification to their US exposure.
iShares Edge MSCI World Value Factor ETF (IWFV)
Our Satellite picks often serve as diversifiers to the Core options, meaning the two should perform differently. We have seen that with this fund in 2025: it has made a pleasing 6.5 per cent sterling return in the first half of the year, compared with a small loss for a conventional MSCI World tracker.
A potential drawback of this fund is that it tends to have similar sector allocations to the MSCI World index, meaning it may not focus as much on ‘oversold’ parts of the market as investors might hope. Those seeking a more granular approach could instead favour a sector fund, an active value fund or their own stock picks.
IWFV has an interesting array of holdings, with top positions including semiconductor companies Qualcomm (US:QCOM) and Micron Technology (US:MU) as well as more obvious ‘value’ stocks such as British American Tobacco (BATS) and HSBC (HSBA).
It doesn’t follow the parent index when it comes to regional exposure, with less than 40 per cent of the portfolio in US shares. Japan accounts for 22.7 per cent, with the UK just shy of 10 per cent.
iShares MSCI World Small Cap ETF (WLDS)
Another small-cap option, WLDS has a competitive 0.35 per cent fee and offers good diversification via its more than 3,000 holdings.
This might feel like a good one-stop shop for investors wanting exposure to smaller companies, although the presence of the US is hard to ignore here, accounting for roughly 60 per cent of the portfolio. If investors are worried about the state of the US economy and expect better things for smaller companies elsewhere, they may instead wish to use a handful of regional small-cap funds.
Xtrackers World Minimum Volatility ETF (XDEB)
Market volatility has been a defining trait of the year so far, and this fund has come out relatively unscathed with flat performance for the first six months. It has fared slightly better than a conventional MSCI World tracker, although in other bouts of volatility (including in 2022) its returns have been notably superior.
This fund is much less focused on the US tech giants than a conventional MSCI World tracker, a preference that can reduce volatility but, again, also introduces a good deal of opportunity cost. It remains a good option for investors who are happy to sacrifice some potential gains for a steadier ride.
NEW: Xtrackers MSCI World ex USA ETF (EXUS)
In recent years, we have modified this list to account for concentration issues in certain markets, be it China’s presence in the MSCI Emerging Markets index or the dominance of the US in global funds. With investors asking whether they should still bet so big on the US, this fund is worth highlighting.
The fund charges just 0.15 per cent and has substantial scale. In terms of the portfolio itself, it has notable exposure to Europe, with SAP, ASML, Nestlé, Roche, Novartis and Novo Nordisk (DK:NOVO.B) as its top holdings. Japan, meanwhile, accounts for almost a fifth of the portfolio, with the UK on 12.5 per cent. Financials, the most prominent sector in the fund, make up a quarter of the portfolio.
It could be useful to pair this fund with an S&P 500 ETF to arrive at a less US-centric global portfolio. But as ever when sizing up broad portfolios, investors should be wary of creating too much duplication with holdings in other funds.
Dropped: Fidelity Global Quality Income ETF (FGQD)
We have tended to like this fund for its defensive approach to equity income, but we have decided to drop it to make space for EXUS.
It still has merit but, as panellist David Liddell points out, it has plenty of overlap with conventional global tracker funds. Note, for example, that its top five positions are all members of the Magnificent Seven cohort.
iShares MSCI Japan Small Cap ETF (ISJP)
A long-standing constituent of this list, ISJP often prompts a few grumbles from our expert panel thanks to its steep 0.58 per cent charge. However, we think it worthwhile to highlight a small-cap option in this region, and note that the fund tends to offset a good chunk of its fee via securities lending. That generated a 0.25 per cent return in the year to the end of March.
This fund is well diversified, with almost 800 holdings, and lists industrials and consumer discretionary as its biggest sector allocations. Even so, as with the other small-cap funds, investors should consider whether active portfolios can deliver better value.
Small as the sample is, it’s notable that two of the three investment trusts from the AIC’s Japanese Smaller Companies sector have substantially outpaced the fund’s returns in recent history. Nippon Active Value (NAVF) has delivered a share price return of nearly 120 per cent in the five years to 30 June 2025, with AVI Japan Opportunity (AJOT) on 81 per cent. The ETF has only managed a 24.6 per cent return over the same period.
With the Japanese corporate governance reform story still playing out and these trusts helping to juice returns via activist measures, going active may well be the better call here.
iShares MSCI Europe Quality Dividend Advanced ETF (EQDS)
We continue to like this fund as a more yield-minded play on European equities, and as a portfolio with a different composition to VERX. EQDS shares just one or two of its 10 holdings with the Vanguard fund in our Core category and has a slightly bigger focus on financials.
The fund is also much less exposed to Germany and France than most European trackers. France makes up 11.6 per cent of the portfolio, with Germany on just 6.2 per cent. Its biggest allocations are to the UK, at 19 per cent, and Switzerland, at 14.3 per cent.
The fund comes with a reasonable yield of around 3 per cent, boosted by the presence of UK stocks in the portfolio. These include the likes of Relx (REL) and Diageo (DGE).
Such shares don’t sit on huge position sizes, but investors should remember that they might end up duplicating allocations if they already hold UK income stocks elsewhere in a portfolio.
SPDR S&P Pan Asia Dividend Aristocrats ETF (PADV)
Specialist ETFs can sometimes come with a big price tag, and that’s the case here. PADV charges 0.55 per cent, although SPDR literature states that the fund does engage in securities lending, which hopefully compensates for this to an extent.
Putting qualms about cost aside, this is a niche but interesting fund. It comes with a decent 12-month trailing dividend yield of around 3 per cent and has around a third of its portfolio apiece in China and Japan. Australian shares make up almost 17 per cent of the fund. It only holds companies that have consistently increased their dividends for at least seven years, meaning its holdings should be made up of the more reliable income payers.
iShares Edge MSCI Emerging Markets Minimum Volatility ETF (EMV)
We noted earlier that emerging market equities have had a pretty good run this year, and against that backdrop this minimum volatility fund has had a poor showing. It’s down by around 1 per cent in sterling terms for the first half of 2025.
That might be as expected, however, given that diversifiers like this often struggle when markets are buoyant. On a longer-term view, it has performed pretty well versus a standard MSCI Emerging Markets tracker, especially in down years such as 2022.
This is a rare example of an emerging markets fund without TSMC among its top holdings, and half of its 10 biggest positions are in communication shares such as Taiwan Mobile (TW:3045).
SPDR MSCI Emerging Markets Small Cap ETF (EMSM)
A racy play with good appeal for those who can tolerate volatility in the pursuit of long-term growth, this ETF holds almost 2,000 stocks and offers good diversification.
It has a chunky allocation to India, amounting to around 27 per cent of the portfolio, with Taiwan on 19 per cent and South Korea on 13.3 per cent. China only makes up 11 per cent of the fund, in contrast to its major presence in many other emerging market and Asia strategies.
A glance at recent performance reminds us that small-cap investing can come with big ups and downs. The fund has returned 28 per cent over three years to 30 June 2025, comfortably outpacing an MSCI Emerging Markets tracker. Over 12 months to the same date, however, it is down by around 1 per cent.
With a 0.55 per cent fee, this fund isn’t the cheapest – an issue that can be pretty common when it comes to more specialist products.
Franklin FTSE China ETF (FRCH)
It isn’t a grim inevitability that specialist funds end up charging higher fees. That much is obvious from the bargain 0.19 per cent fee on this China ETF, which has managed to bag plenty of assets on the back of its pricing.
It makes sense as an option if investors wish to have dedicated China exposure, but you should remember that this can result in a concentrated portfolio.
That’s the case for this fund, in a way. Yes, it has almost 1,000 holdings, showing commitment to the mantra of diversification. But it’s pretty concentrated in other aspects, with a 14 per cent allocation to Tencent (HK:700) and 9 per cent in Alibaba, although the third-biggest holding, Xaomi (HK:1810), sits on a much lower allocation of 4.7 per cent. Investors are taking quite a lot of stock-specific risk related to these two companies. Having said that, anyone investing in China in recent years has had to accept some pretty big ups and downs anyway, and such is the same for single-country investing in this region.
Franklin FTSE India ETF (FRIN)
Like its stablemate, this India fund charges just 0.19 per cent, and has accrued plenty of assets. It has 263 holdings, and has less of a concentration issue than its China-focused peer. Top holding HDFC (IN:500180) sits on a 7.3 per cent allocation, with Reliance Industries (IN:500325) on 6.5 per cent. Its biggest sector allocations are to financials and consumer discretionary shares.
A glance at recent returns again shows how emerging markets can wax and wane. This fund is down by 3.7 per cent over one year to 30 June 2025 but up by 35.6 per cent over three years to the same date. The China ETF, meanwhile, is up by 24.1 per cent over one year but down by 4 per cent over three.
iShares MSCI EM ex-China ETF (EXCS)
Chinese equities have been flying over the past year, but as the performance data for FRCH shows, it was a rocky few years before that. Emerging market ex-China ETFs have grown in popularity in recent times as a result, and we include this name in the list as an option for those wanting a more specific approach.
As with the MSCI World ex-USA ETF we highlighted earlier, investors could hold this fund and a dedicated China fund alongside it. This ETF has had an almost inverse correlation to the China fund in our list, making a small gain over one year and much healthier returns over three.
It has big allocations to the information technology and financials sectors, at around 30 per cent of the portfolio each. Meanwhile, the exclusion of China understandably forces greater concentration elsewhere. Taiwan makes up nearly 27 per cent of the fund, with TSMC on 14.6 per cent alone. India accounts for 25.3 per cent, with South Korea on 14.8 per cent.
Unusually, the ETF’s second-biggest position is a 6.1 per cent allocation to a Brazilian equity ETF, although its other holdings are more in keeping with the usual (non-China) emerging market mainstays.
iShares $ TIPS 0-5 ETF GBP Hedged (TI5G)
A fund that might be in for a rough ride amid a flight from US assets, this nevertheless adds another form of exposure to inflation-linked bonds, while also hedging out currency effects. It has good scale, and charges a low fee of 0.12 per cent.
Vanguard $ Emerging Markets Government Bond ETF (VEMA)
This fund stands out for its (recently lowered) 0.23 per cent fee, its level of scale and good diversification, with more than 1,300 bonds in the portfolio. The majority of its portfolio has a maturity of less than 10 years, something that avoids undue sensitivity to interest rate changes, and there’s a mixture of different credit quality bonds.
This is still a good option for a niche and risky part of the bond market, although investors should take note that this fund focuses on bonds issued in dollars rather than local currencies. Dollar debt has taken a hit lately as the currency has weakened.
Invesco US Treasury Bond 7-10 Year ETF GBP Hedged (TRXS)
This fund offers exposure to US government bonds with a fairly middle-of-the-road level of interest rate sensitivity, and returns hedged back to sterling. It has a nice yield of around 4.2 per cent and charges a mere 0.1 per cent.
As discussed, some investors appear to have turned their back on US Treasuries for the time being. But this is still one option for the investor looking to broaden out their government bond exposure.
Amundi Smart Overnight Return ETF (CSH2)
This money market fund entered the list in 2023 as a good source of income with none of the currency or duration risk that can affect conventional bond funds. It looks to pay out the base rate each year, making it a useful place to park some cash in an era of higher rates.
Dropped: JPMorgan Global High Yield Corporate Bond Multi-Factor ETF (JGYH)
A more complicated fund than most in the list, we drop this name simply to make space for a thematic portfolio that looks especially timely.