In 2026, the market could see a rotation favoring more cyclical and defensive areas, benefiting bonds and dividend stocks. Small-caps, filled with unprofitable companies, may lag. Investors should consider moving away from last year’s winners and focus on quality companies. Two Vanguard ETFs worth owning are the Dividend Appreciation ETF and Total Bond Market ETF.

The Vanguard Dividend Appreciation ETF tracks companies that have increased dividends for 10+ years, offering a cost-effective way to add high-quality companies to a portfolio. While the strategy is sound, the execution lacks by market-cap-weighting components, leading to larger weights for larger companies regardless of dividend history.

The Vanguard Total Bond Market ETF covers the entire U.S. bond market, including corporate bonds and Treasuries, offering a risk-off play. With normalized yields, bonds could provide real income again, especially if the economy slows and investors seek to reduce risk.

The Vanguard Russell 2000 ETF, tracking small-cap stocks, may not be a good index as 40% of components are unprofitable. Small-caps could face challenges with rising interest rates due to high debt reliance, hindering sustainable progress relative to large-caps.

Consider the Vanguard Dividend Appreciation ETF, but note that the Motley Fool Stock Advisor team recently identified 10 better stocks for potential high returns in the coming years. Stock Advisor has a total average return of 968%, outperforming the S&P 500 by a large margin. Don’t miss out on the latest top 10 list and join the investing community.

Read more at Yahoo Finance: 2 Vanguard ETFs to Own in 2026 and 1 I’m Avoiding