If you want to make money on popular ETFs this year, there's one key strategy — avoid the S&P 500.
All 10 of the largest ETFs with positive year-to-date returns, including Vanguard FTSE Developed Markets, iShares Core MSCI EAFE and Vanguard Total Bond Market, skip the exposure to large U.S. stocks, says data from Morningstar Direct.
That's quite an about-face. S&P 500-focused ETFs dominated in terms of size and performance for years. The broadening out is forcing investors to reconsider what it means to be diversified in the age of Trump administration tariffs.
"After back-to-back years of 20% gains for the S&P 500, investors are being reminded in 2025 of the benefits of investment style diversification," said Todd Rosenbluth, director of research at TMX VettaFi. "Developed market equity ETFs like VEA and IEFA are significantly outperforming as there are great stocks outside of the U.S. A stock portfolio should include more than just Apple, Microsoft and other U.S. giants."
Going Global Beyond S&P 500
U.S. investors used to think just owning the S&P 500 was all they needed. And it's hard to fault them. Returns definitely rewarded a U.S. bias — until President Donald Trump's first 100 days, which are the worst since the second Nixon administration.
The giant $605 billion-in-assets Vanguard S&P 500 ETF, the largest ETF, returned 15.3% annually in the past five years. That demolishes the 11.1% annualized five-year return of Vanguard FTSE Developed Markets, which owns shares of companies in developed countries except the U.S.
But the fortunes have reversed this year. The Vanguard FTSE Developed Market ETF returned 11.2% this year. On the other hand, the Vanguard S&P 500 is down 5.1% on a total return basis.
It's not just developed nations, though, racing past U.S. markets. Large ETFs that own shares of companies in emerging markets are also outperforming the S&P 500. A few examples include the $83 billion-in-assets iShares Core MSCI Emerging Markets ETF and $81 billion-in-assets Vanguard FTSE Emerging Markets ETF. IEMG has returned 3.6% this year while VWO is up 2.6%.
"There is strong growth potential in markets like China, India and Taiwan but the risks remain elevated," Rosenbluth said. "Adding exposure through ETFs like IEMG and VWO in moderate doses could make sense for some but not all investors."
Playing It Safe Beyond S&P 500
Given the massive unpredictability in the market, it's not surprising to see investors cling to popular ETFs for safety. Gold and U.S. bond ETFs are common examples.
There's actually a bull market raging in gold ETFs, a refuge for investors worried about inflation and sluggish economic growth. The largest gold ETF, the $100.6 billion-in-assets SPDR Gold Shares is up 26.4% this year. That's a significant rally as it's pushing gold's longer term returns past the S&P 500.
The SPDR Gold Shares ETF returned more than 20% annualized in the past three years. That tops the 12.1% three-year annualized return of the S&P 500.
And while global bonds are outperforming U.S. debt this year, large bond funds with heavy exposures to U.S. Treasuries are still standouts among large funds. The $124 billion-in-assets iShares Core US Aggregate Bond ETF returned 3.3% this year so far.
"Fixed income ETFs like AGG and BND provide a different level of diversification due to their ownership of U.S. government bonds and investment grade corporate bonds that offer stable income," Rosenbluth said. "Bonds typically provide ballast to a portfolio."
But despite the shifts, U.S. investors continue to pile into the S&P 500 waiting for a recovery. "Vanguard 500 has approximately $50 billion of net inflows this year," Rosenbluth said. "Despite relative weakness, many investors are using the sell-off in U.S. stocks as a buying opportunity via this ETF."
Top Performing Large ETFs
| Name | Ticker | YTD return % | Assets ($ billions) |
|---|---|---|---|
| Vanguard FTSE Developed Markets | VEA | 11.2% | $150.4 |
| iShares Core MSCI EAFE | IEFA | 12.1 | 132.8 |
| Vanguard Total Bond Market | BND | 3.2 | 126.7 |
| iShares Core US Aggregate Bond | AGG | 3.2 | 123.9 |
| SPDR Gold Shares | GLD | 26.4 | 100.6 |
| Vanguard Total International Stock | VXUS | 8.8 | 86.1 |
| iShares Core MSCI Emerging Markets | IEMG | 3.6 | 83.4 |
| Vanguard FTSE Emerging Markets | VWO | 2.6 | 81.6 |
| Vanguard Total International Bond | BNDX | 1.4 | 64.8 |
| iShares MSCI EAFE | EFA | 12.2 | 60.0 |
