Top 7 Budget-Friendly ETFs to Boost Your Portfolio in 2025

Unlock the Power of Low-Cost ETFs to Enhance and Diversify Your Investments

Even small differences in fees can significantly impact your investment returns over time. For instance, a $10,000 investment growing at 7% annually with a 0.03% fee will outperform the same investment charged 1.5% fees by 36% after 30 years. This demonstrates why savvy investors prefer low-cost exchange-traded funds (ETFs) to maximize growth.

The surge of ultra-low-cost ETFs has revolutionized investing, enabling portfolio diversification across stocks, bonds, and other asset classes at annual expenses under $30 per $100,000 invested — a fraction of past costs.

Here’s a curated list of seven affordable ETFs that form the foundation of a well-rounded portfolio in 2025, covering U.S. and international equities, bonds, dividend-focused, and ESG investments. Each fund features minimal fees and broad market exposure.

Key Insights

• Ultra-low-cost ETFs can save investors thousands in fees compared to actively managed funds over time.
• Broad market ETFs provide instant diversification with expense ratios as low as 0.03%.
• A diversified portfolio can be built with just a few low-cost ETFs spanning equities and bonds.
• Consider factors beyond fees like liquidity, tracking accuracy, and tax efficiency when choosing ETFs.
• ESG and dividend ETFs may have slightly higher fees but offer targeted exposure to sustainable and income-generating strategies.

Understanding Low-Cost ETFs Before You Invest

Low-cost ETFs, typically under 0.20% expense ratios, have democratized wealth building. Many leading ETFs charge just 0.03%, translating to only $3 annually per $10,000 invested. These funds follow passive strategies by tracking market indexes, reducing costs by avoiding active management and frequent trades.

Expense ratios reflect yearly fund operating costs as a percentage of assets. Besides fees, evaluate ETF trading volume (for ease of transactions), tracking error (index fidelity), and tax efficiency. Higher trading volumes generally mean lower trading costs.

Core U.S. Market ETFs

1. Vanguard Total Stock Market ETF (VTI)

VTI offers comprehensive exposure to over 4,000 U.S. stocks across all market caps by tracking the CRSP U.S. Total Market Index. Its high liquidity and broad diversification reduce individual stock risk and align with overall market performance, making it ideal for long-term growth.

Major holdings include Apple, Microsoft, and Amazon, alongside emerging companies. VTI is perfect for investors seeking a low-cost, all-in-one U.S. equity core.

Ideal for:

• Investors wanting broad U.S. stock market exposure.
• Those building a diversified core portfolio.
• Cost-conscious investors focused on steady growth.

2. Schwab U.S. Broad Market ETF (SCHB)

SCHB tracks the Dow Jones U.S. Broad Stock Market Index, covering around 2,500 large and mid-sized U.S. companies. Matching VTI’s 0.03% expense ratio, it offers a slightly more concentrated portfolio emphasizing established firms, appealing to investors preferring less volatility.

Schwab clients benefit from commission-free trades, making SCHB a cost-effective choice for broad U.S. equity exposure.

Ideal for:

• Investors seeking broad, affordable U.S. stock market access.
• Those wanting a core holding with a focus on larger companies.
• Long-term growth-oriented portfolios with minimal fees.

Bond Market ETFs

3. Vanguard Total Bond Market ETF (BND)

BND provides broad exposure to over 11,000 U.S. investment-grade bonds, including government, corporate, and mortgage-backed securities, by tracking the Bloomberg U.S. Aggregate Bond Index. With a 0.03% expense ratio and high liquidity, it offers steady income and risk mitigation to balance equity holdings.

While sensitive to interest rate changes, BND’s diversification minimizes issuer risk, making it a dependable choice for income and stability.

Ideal for:

• Conservative investors seeking income and capital preservation.
• Those balancing equity risk with fixed income.
• Long-term portfolios aiming for stability.

International Diversification ETFs

4. iShares Core MSCI Total International Stock ETF (IXUS)

IXUS offers broad exposure to over 40 countries outside the U.S., including developed and emerging markets, by tracking the MSCI ACWI ex USA IMI Index. With a 0.07% expense ratio, it provides cost-effective access to global equities without currency or research hassles.

Advisors often recommend allocating around 20% of equity portfolios to international shares for diversification. IXUS’s geographic spread helps offset country-specific risks.

Ideal for:

• Investors seeking global diversification beyond U.S. markets.
• Those targeting developed and emerging economies.
• Long-term investors balancing global opportunities and risks.

5. Vanguard FTSE Developed Markets ETF (VEA)

VEA focuses on established economies like Japan, the U.K., and Canada by tracking the FTSE Developed All Cap ex US Index. Its 0.05% expense ratio offers affordable access to stable international markets with typically lower volatility than emerging markets.

Top holdings include Nestle, ASML, and Novo Nordisk. Many investors combine VEA with emerging market ETFs to tailor international exposure.

Ideal for:

• Investors prioritizing developed international markets.
• Those seeking stable, moderate-risk global equity exposure.
• Portfolio builders looking for low-cost international diversification.

Dividend Income ETF

6. iShares Select Dividend ETF (DVY)

DVY targets about 100 U.S. companies with strong, consistent dividend histories via the Dow Jones U.S. Select Dividend Index. With a 0.38% expense ratio, it’s pricier than broad market ETFs but offers focused income generation.

Its holdings lean toward sectors with stable cash flows like utilities, consumer staples, and financials, providing diversification benefits beyond dividends.

Ideal for:

• Investors seeking reliable dividend income.
• Retirees or those needing steady cash flow.
• Individuals balancing equity growth with income.

ESG-Focused ETF

7. iShares ESG Aware MSCI USA ETF (ESGU)

ESGU offers U.S. equity exposure aligned with environmental, social, and governance principles by tracking the MSCI USA Extended ESG Focus Index. At a 0.15% expense ratio, it balances sustainability with market returns, excluding companies with poor ESG records.

Top holdings include Apple, Johnson & Johnson, and Microsoft, weighted by ESG scores alongside market capitalization.

Ideal for:

• Investors integrating ESG values into their portfolios.
• Those wanting broad U.S. equity exposure with sustainability focus.
• Long-term investors prioritizing ethical considerations.

ETFs vs. Mutual Funds

ETFs: Trade like stocks with flexibility, lower fees, and better tax efficiency.

Mutual Funds: Priced once daily, suited for buy-and-hold strategies but generally less tax efficient.

Getting Started with ETFs

Beginners should consider broad U.S. market ETFs like VTI or SCHB for instant diversification and low costs. As comfort grows, adding international and bond ETFs enhances portfolio balance.

ETF Dividends Explained

ETF dividends combine income from multiple securities and are typically paid monthly or quarterly, with options for reinvestment or cash payouts, differing from single-stock dividends.

Impact of Currency on International ETFs

International ETFs expose investors to currency fluctuations that can boost or reduce returns. Currency-hedged ETFs reduce this risk but may increase costs.

Final Thoughts

Low-cost ETFs provide an efficient, diversified investment approach at minimal fees. Selecting ETFs based on costs, liquidity, tracking accuracy, and alignment with your goals can build a robust, cost-effective portfolio for 2025 and beyond.

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