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Build a Solid Portfolio with ETFs

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  Published in Stocks and Investing on Monday, January 12th 2026 at 4:52 GMT by The Motley Fool

Building a Foundation with ETFs

The cornerstone of any sensible portfolio should be exchange-traded funds (ETFs). Their appeal lies in instant diversification - a crucial safeguard against the volatility that inevitably impacts individual stocks. Instead of concentrating your investment in a single company, ETFs spread your risk across a broad spectrum of assets. A prime example is the Vanguard Total Stock Market ETF (VTI). VTI provides unparalleled exposure to the U.S. market, effectively mirroring the performance of thousands of publicly traded companies. Furthermore, diversifying internationally is a crucial component of a robust strategy; consider ETFs focused on developed and emerging markets.

Capitalizing on the Green Revolution: Renewable Energy

One sector poised for continued growth is renewable energy. Driven by global commitments to combat climate change and decreasing technology costs, the transition to cleaner energy sources is no longer a question of 'if,' but 'when.' While the renewable energy sector experiences periods of volatility - a common characteristic of growth industries - the long-term trajectory remains exceptionally promising. An ETF like the iShares Global Clean Energy ETF (ICLN) offers a convenient way to gain exposure to companies innovating in solar, wind, hydro, and other renewable technologies. It's important to note that this area can be sensitive to policy changes and technological advancements, so staying informed is key.

Income Generation with Real Estate: REITs

For investors seeking a regular income stream, Real Estate Investment Trusts (REITs) present a compelling opportunity. REITs are companies that own and operate income-producing real estate - from office buildings and shopping malls to apartments and data centers. A defining feature of REITs is their legal requirement to distribute a significant portion of their earnings to shareholders, making them particularly attractive for income-focused investors. The Vanguard Real Estate ETF (VNQ) offers a diversified approach to this asset class, mitigating the risk associated with investing in a single property or REIT.

Strategic Stock Picks: Amazon and Costco

While ETFs provide broad diversification, selectively choosing individual stocks with exceptional growth potential can amplify returns. Amazon (AMZN) and Costco (COST) consistently demonstrate the characteristics of well-managed, forward-thinking companies. Amazon's dominance in e-commerce is undeniable, and its ongoing expansion into cloud computing (Amazon Web Services) and healthcare positions it for continued success. Costco's membership-based warehouse club model generates substantial customer loyalty and consistently delivers strong financial results, demonstrating the power of offering exceptional value. However, individual stock selection requires thorough research and an understanding of the associated risks - a company's performance can be impacted by unexpected events or shifts in consumer behavior.

A Sample Portfolio Allocation (as of January 12th, 2026)

To illustrate how these investments might be combined, consider the following allocation as a starting point for a $10,000 portfolio:

• 30% - Vanguard Total Stock Market ETF (VTI): Provides broad exposure to the U.S. equity market.
• 20% - iShares Global Clean Energy ETF (ICLN): Capitalizes on the growing demand for renewable energy.
• 20% - Vanguard Real Estate ETF (VNQ): Generates income through real estate investments.
• 30% - (15% Amazon (AMZN), 15% Costco (COST)): Targeted investments in established, growth-oriented companies.

Note: This is a sample allocation and should be adjusted based on individual risk tolerance and investment goals.

Important Considerations and Disclaimer

Remember that investing always carries risk. Market conditions can change rapidly, and past performance is not indicative of future results. Diversification helps to mitigate risk, but it does not guarantee a profit or protect against loss. It is crucial to conduct thorough research and understand the potential risks involved before making any investment decisions. This article is for informational purposes only and is not a substitute for professional financial advice. Consulting with a qualified financial advisor is strongly recommended to tailor a strategy to your specific circumstances. Investing in the stock market involves the risk of loss and you could lose money.