Portfolio Managers Rarely Beat This Simple Strategy. The Data Keeps Proving It.

By David Dierking – Mar 4, 2026 at 10:00AM ESTKey PointsActively managed equity funds often charge high fees and have a history of underperforming their benchmarks.A strategy of investing in low-cost, diversified index funds can do a better job of delivering superior risk-adjusted returns.One U.S. stock ETF and one international stock ETF can give you everything you need in your portfolio.So far in 2026, active fund managers are having one of their best years in nearly two decades. Goldman Sachs says that 57% of large-cap active mutual fund managers are beating their benchmarks, far above the long-term average. Unfortunately, that's only one year. The long-term data shows that active managers have a pretty miserable record of staying ahead of their benchmarks. Over the past 10 years ending in 2024, 84% of large-cap active mutual funds lagged their benchmarks. This is the core reason why investment in index funds has surged over the past couple of decades. After years of paying high fees for underperformance, investors figured out that buying an ultra-low-fee index exchange traded fund (ETF) and simply matching the index instead of trying to beat it is a great idea. Today, the largest ETFs, including the Vanguard S&P 500 ETF and the iShares Core S&P 500 ETF, manage hundreds of billions of dollars and often have expense ratios of 0.05% or less. That makes these ETFs ideal for long-term portfolio building. They're so diversified, that it often takes just a couple of funds to construct a complete equity portfolio that can be held forever. One of the best long-term portfolios consists of two ETFs -- one for U.S. stocks and one for international stocks. That data has proven that passively managed index funds are the way to go long term. These two can set you up for life. Source: Getty Images.

Vanguard Total Stock Market ETF The Vanguard Total Stock Market ETF (VTI +0.83%) is a one-stop shop for the entire U.S. equity market. It includes roughly 3,500 stocks across all sizes, and its 0.03% expense ratio ensures that virtually every dollar that the fund earns will stay in your pocket. ExpandNYSEMKT: VTIVanguard Total Stock Market ETFToday's Change(0.83%) $2.79Current Price$338.51Key Data PointsDay's Range$335.34 - $338.6752wk Range$236.42 - $344.42Volume1.2M Many people will choose the Vanguard S&P 500 ETF for their U.S. stock coverage, and that's understandable, but I prefer the total market approach. I like the inclusion of mid-cap and small-cap stocks because it provides a better mix of asset-class returns that can smooth out volatility over time.

Vanguard Total International Stock ETF The Vanguard Total International Stock ETF (VXUS +0.74%) does for international stocks what the above fund does for U.S. stocks. Covering pretty much the entire investable universe, including developed and emerging markets, it invests in an astonishing 8,600 stocks, making it one of the most comprehensive international equity ETFs you'll find. Plus, it only charges a razor-thin expense ratio of 0.05%. ExpandNASDAQ: VXUSVanguard Total International Stock ETFToday's Change(0.74%) $0.59Current Price$80.15Key Data PointsDay's Range$79.49 - $80.2052wk Range$54.98 - $84.28Volume3.2M The two-ETF total stock portfolio International stocks have been largely ignored for more than a decade, due to their underperformance relative to the S&P 500. That has changed in 2026. U.S./international stock leadership tends to swing back and forth in multiyear cycles. After a 15+ year leadership stretch for U.S. stocks, the time may finally be here for international stocks. This is the case for having them in a diversified portfolio. Your specific allocation between these two ETFs may vary. An 80/20 mix between U.S. and international stocks may be a good starting point, but always shift to your personal situation and preferences.Read NextMar 4, 2026 •By Matt Frankel, CFPMeet The ETF That Tracks Everything and Costs Almost NothingFeb 27, 2026 •By Selena MaranjianFor Long-Term Growth, Buy These 3,511 Stocks NowFeb 26, 2026 •By David Dierking5 Simple ETFs to Buy With $1,000 and Hold for a LifetimeFeb 25, 2026 •By David DierkingA Beginner-Friendly ETF Portfolio That Requires Almost No MaintenanceFeb 25, 2026 •By Dana GeorgeIf You Like Money, This ETF Could Be What You're Looking ForFeb 23, 2026 •By Reuben Gregg BrewerHow Broad Market ETFs Like VTI Can Support Long-Term Portfolio StabilityStocks MentionedVanguard Total Stock Market ETFNYSEMKT: VTI$338.52(+0.83%)+$2.79Vanguard Total International Stock ETFNASDAQ: VXUS$79.96(+0.50%)+$0.40*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.