Building a Resilient Long-Term Portfolio with Low-Cost, Broadly Diversified ETFs

In an era of market volatility and shifting economic cycles, constructing a resilient long-term portfolio requires a strategic balance between stability and growth. The core-satellite approach-a framework that combines low-cost, broadly diversified index funds with targeted, higher-risk satellite holdings-has emerged as a compelling solution. By anchoring portfolios in low-expense, market-tracking ETFs and layering in niche strategies, investors can achieve diversification, cost efficiency, and enhanced risk-adjusted returns. This analysis explores how to implement this strategy using data from 2025, focusing on core ETFs like SPYM, VTI, and VXUS, as well as satellite options such as AVUV and XMVM.

Core ETFs: The Foundation of Stability

The core of a long-term portfolio should prioritize low fees, broad diversification, and consistent performance. Three standout options in 2025 are the Vanguard Total Stock Market ETF (VTI), the Vanguard Total International Stock ETF (VXUS), and the State Street SPDR Portfolio S&P 500 ETF (SPYM).

• VTI (expense ratio: 0.030%) has been a cornerstone of U.S. equity exposure, capturing the performance of the entire U.S. stock market through a single fund. Morningstar awarded it a Gold Medalist Rating, citing its efficient tracking of the CRSP US Total Market Index and its ability to outperform most peers over a full market cycle. Over the 10 years through September 2025, VTI's tax efficiency and low fees contributed to its appeal as a core holding.
• VXUS (expense ratio: 0.05%) provides global diversification by investing in 8,000 international stocks, including emerging markets. It delivered an 8.4% annualized return over the same period, outperforming its category average by 80 basis points. Its broad exposure and low cost make it an ideal satellite or core component for investors seeking geographic diversification.
• SPYM (expense ratio: 0.03%) has outperformed the S&P 500 benchmark, achieving a 14.42% annualized return over the past decade as of November 2025. This outperformance, combined with its low fees, positions SPYM as a strong alternative to traditional S&P 500 ETFs like VOO, which, despite a 5-star Morningstar rating, may not offer the same cost-performance balance.

These core ETFs exemplify the advantages of index-based investing: minimal fees, broad diversification, and consistent returns. However, as Morningstar notes, investors should remain mindful of subtle differences in tracking methodologies and liquidity, which can impact performance.

Satellite ETFs: Enhancing Returns with Strategic Exposure

While core ETFs provide stability, satellite holdings introduce opportunities to capitalize on specific sectors, regions, or investment themes. In 2025, several satellite ETFs stand out for their performance, low fees, and alignment with long-term goals.

• Avantis U.S. Small Cap Value ETF (AVUV) (expense ratio: 0.25%) targets undervalued small-cap stocks, a segment historically known for outperforming during market cycles. Though its 10-year annualized return is not yet available due to its 2019 inception, its active management approach and Morningstar's emphasis on its investment process suggest potential for long-term growth.
• Invesco S&P MidCap Value with Momentum ETF (XMVM) (expense ratio: 0.39%) combines value investing with momentum strategies, delivering a 11.52% 10-year annualized return as of November 2025. Its 5-star Morningstar Medalist Rating and 4.11% gain in the past year highlight its ability to outperform its category.
• International satellites like VXUS and iShares Core MSCI EAFE ETF (IEFA) (expense ratio: 0.07%) offer exposure to global markets. VXUS's Gold Medalist Rating and IEFA's low cost make them ideal for investors seeking to hedge against U.S. market volatility. For emerging markets, the iShares MSCI EM ESG Enhanced CTB ETF and Amundi Prime Emerging Markets ETF received Gold ratings in June 2025, reflecting their potential to balance ESG criteria with growth.

Sector-specific satellites also play a role. The Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100, provides concentrated exposure to high-growth tech stocks, while XMVM and EA Bridgeway Omni Small-Cap Value ETF (BSVO) offer diversification across mid-cap and small-cap value segments.

Balancing Core and Satellite Holdings

The core-satellite strategy thrives on a disciplined allocation between low-cost index funds and higher-risk satellites. For example, a 70% core (VTI, VXUS, SPYM) and 30% satellite (AVUV, XMVM, QQQ) portfolio would balance broad diversification with targeted growth. This approach mitigates the risks of overconcentration while leveraging the outperformance potential of niche strategies.

Morningstar's Medalist Ratings further guide satellite selection. Funds with Gold or Silver ratings, such as XMVM and VXUS, are more likely to deliver consistent returns over a full market cycle. Conversely, higher-fee satellites like the VanEck Social Sentiment ETF (BUZZ) (expense ratio: 0.76%) may offer thematic exposure but require careful evaluation of their risk-return profiles.

Conclusion: A Blueprint for Long-Term Resilience

Building a resilient portfolio in 2025 demands a blend of low-cost, broadly diversified core ETFs and strategically chosen satellites. Core holdings like VTI, VXUS, and SPYM provide the bedrock of stability, while satellites such as AVUV, XMVM, and QQQ introduce opportunities for enhanced returns. By adhering to Morningstar's Medalist Ratings and prioritizing expense ratios, investors can construct a portfolio that balances growth, diversification, and cost efficiency. As markets evolve, this framework offers flexibility to adapt to changing conditions without sacrificing long-term objectives.