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4 Best ETFs for the Rest of 2026

Barchart·10/12/2026 06:00:02

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Exchange-traded funds have become a clear favorite of the "smart money." According to a recent survey from financial services data and analytics firm ISS Market Intelligence, when asked about how they would invest client assets if a favored manager was available across all types of vehicles, 60% said they preferred ETFs over open-ended mutual funds and separately managed accounts—a huge jump from 49% just a few years ago!

Why? Well, I can think of a host of reasons, but perhaps the two most important are their extraordinary versatility and relatively low fees. Not only can you use ETFs to execute hundreds of strategies across numerous asset classes, but their cost is virtually always lower than any comparable alternatives.

Some ETFs are obviously better than others. However, the best exchange-traded funds (ETFs) to buy, from your point of view, might not be the same for another investor thanks to differences in risk appetite, investing horizon, and the current market environment.

Fortunately, I like to cover all of my bases.

Read on, and I'll tell you about some of the best ETFs to buy for the rest of 2026.

Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.

The Best ETFs for the Rest of 2026

Every time we get to a year's midway point, Wall Street's prognosticators review their original market outlooks for the year and provide updated thoughts about what might happen over the remaining months.

Without fail, some wild event (COVID, Russia-Ukraine war, tariff chaos, etc.) occurs that throws many of those predictions for a loop … and yet, those prognosticators end up being correct in a lot of ways. Maybe the S&P 500 doesn't land on the exact number they gave, but you'd be amazed at how often the “pros” come close when it comes to corporate earnings and emerging themes.

Those factors alone make trying to deliver a "best anything" list difficult—ETFs, stocks, fashion choices, whatever. Then, once you also stop to consider that every single reader has their own long-term investing goals, risk tolerances, and time horizons ... you start to realize that no best-of list can juggle every one of those variables perfectly. So, my thinking is …

Instead, I go a different route. Rather than exclusively highlight funds that should take off based on market predictions, my annual list gravitates around three types of ETFs:

Core ETFs: I always like to start with a few core ETFs that, if you don't already own them, you can buy at pretty much any time and hold on to it—for the rest of 2026, sure, but a lot longer than that if you'd like.
Defensive ETFs: These are protective ETFs you might not necessarily buy at the beginning of the year, but that you should be aware of in case you need to play portfolio defense.
Tactical ETFs: I can't throw in the towel completely. People want to see what the pros think will take off each year, so I list the ETFs that deal with experts' predictions about what will be successful in the year ahead (or longer). And I keep up on these to see how they've played out throughout the year.

If you read on, I'll cover a few picks in that final third. Or, you can check out my full list of the best ETFs to buy.

Vanguard Mega Cap ETF

Type: Tactical
Style: U.S. mega-cap stocks
Assets under management: $10.3 billion*
Dividend yield: 0.9%
Expense ratio: 0.05%, or 50¢ per year on every $1,000 invested

What is MGC?

The Vanguard Mega-Cap ETF (MGC) is an index fund that provides access to the largest U.S. stocks—companies that represent roughly the top 70% of American equity markets' capitalization.

What does MGC hold?

This Vanguard index fund is benchmarked to the CRSP US Mega Cap Index, a benchmark of so-called "mega-cap" stocks.

It's best to think about Vanguard Mega Cap ETF in contrast to an S&P 500 index fund. While an S&P 500 fund owns the equities of 500 of America's largest companies, MGC holds just around 175—but virtually all of those companies are also the S&P 500's largest holdings.

Both funds are market cap-weighted, which means the larger the stock, the greater percentage of assets the fund will invest in that stock. Because MGC spreads that money across fewer stocks, its holdings are more concentrated. For instance, Nvidia (NVDA), Apple (AAPL), and Microsoft (MSFT) are the top three holdings for both MGC and the S&P 500; while they account for 21% of the S&P 500, they represent 25% of MGC's assets.

Why should you consider MGC?

The first half of the year belonged to small-cap companies, but that window might be closing.

"We see less upside for U.S. small-cap equities [than large and mid-caps] through year-end 2026 and maintain our unfavorable rating," says the Wells Fargo Investment Institute. “Even assuming modest economic growth, the combination of higher interest rates, higher labor-cost sensitivity, and limited pricing power may constrain earnings visibility for smaller firms.”

Researchers at outfits such as JPMorgan Chase and Carson Group instead like large caps to finish out the year, in part because they include numerous artificial intelligence (AI) leaders that have been driving earnings and margins higher.

MGC provides more targeted exposure to large caps than a traditional S&P 500 fund; for instance, right now, it's 95% weighted in large companies versus about 80% for the S&P 500. Vanguard's mega-cap fund is also more concentrated in technology, at about 43% of assets (vs. 39%).

Should large caps keep rolling, MGC should be one of the best ETFs to buy for the rest of this year.

* Vanguard fund assets are spread across multiple share classes, including mutual funds and ETFs alike. Assets listed for each Vanguard ETF in this story are for the ETF share class only.

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Invesco Pharmaceuticals ETF

Type: Tactical
Style: Industry (Pharmaceuticals)
Assets under management: $571.0 million
Dividend yield: 0.8%
Expense ratio: 0.58%, or $5.80 per year on every $1,000 invested

What is PJP?

The Invesco Pharmaceuticals ETF (PJP) is an industry ETF that provides exposure to pharmaceutical companies within the healthcare sector.

What does PJP hold?

The PJP tracks the Dynamic Pharmaceutical Intellidex Index (Index), which evaluates pharmaceutical companies based on a variety of criteria, including price and earnings momentum, quality, management action, and value.

This is a tight portfolio of just 28 pharma firms, but it does span the market-cap gamut, resulting in a much lower average holding market cap of about $35 billion versus the category average ($77 billion). Investors enjoy access to true "Big Pharma" names like AbbVie (ABBV) and Johnson & Johnson (JNJ), but also smaller up-and-comers such as Collegium Pharmaceuticals (COLL) and Liquidia (LQDA).

Why should you consider PJP?

Healthcare underperformed the market by a few points in 2025, but pharmaceuticals took off. And Aniket Ullal, SVP and Head, ETF Research & Analytics, CFRA, saw a similarly bifurcated sector in 2026.

"We expect a bounceback in the pharma / biotech sector (other sectors in healthcare like managed care will continue to be under pressure)," he told us in late 2025. "CFRA currently has Buy or Strong Buy ratings on many holdings like Eli Lilly (LLY), Amgen (AMGN), and Merck (MRK)." UBS analysts agreed: "Pharma & Biotech stands out for strong momentum, as AI accelerates drug discovery and clinical trial efficiency," they wrote.

I said at the start of the year that "rather than own the whole sector, then, the best ETF for 2026 could end up being a more industry-specific play such as PJP." So far, so good.

The broader healthcare sector struggled mightily during the first half of 2026, though it has since come back and only trails the S&P 500's performance by a couple percentage points as I write this. Medicare Advantage rate-increase proposals slammed insurers specifically, while investors have broadly eschewed defensive sectors to chase growthier parts of the market. However, the pharmaceuticals story is alive and well, more than doubling up the sector through late September. There's no reason to move away from this call across the rest of the year.

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WisdomTree Japan Hedged Equity Fund

Type: Tactical
Style: Single-country (Japan)
Assets under management: $7.0 billion
Dividend yield: 0.9%
Expense ratio: 0.48%, or $4.80 per year on every $1,000 invested

What is DXJ?

The WisdomTree Japan Hedged Equity Fund (DXJ) is an index fund that provides single-country exposure to Japanese equities.

What does DXJ hold?

WisdomTree's Japan ETF tracks the WisdomTree Japan Hedged Equity Index, which provides exposure to large-, mid- and small-cap dividend stocks from Japan. However, it also neutralizes exposure to fluctuations in the Japanese yen relative to the U.S. dollar by holding forward currency contracts, as well as excluding companies that derive 80% or more of their revenue from Japan. Basically, the index is designed to have greater returns than similar non-hedged products when the yen is weak, and worse returns when the yen is strong.

DXJ currently owns about 430 stocks, with heavy weights in industrials (25%), financials (21%), consumer discretionaries (16%), and technology companies (13%). Top holdings are a who's who of Japanese blue chips, including Mitsubishi UFJ Financial (MUFG), Toyota Motor (TM), and Sumitomo Mitsui Financial Group.

Why should you consider DXJ?

"Japanese equities enter 2026 with supportive political, economic, and policy conditions, underpinned by the new Takaichi administration and strengthened U.S.-Japan ties," Amova Asset Management's Japan equity team said heading into the new year.

The country's stocks have done well so far in 2026, and Amova still likes the group for the rest of the year.

"Japan remains our preferred equity market," Amova Asset Management says in its second-half outlook. “The Committee sees Japanese equities remaining structurally supported not only by robust earnings but also by improving governance and the emergence of positive real wages. Another equity-supportive factor is the potential for domestic reflation broadening and in turn supporting financial institutions and other sectors as they benefit from the ongoing resilience and reflationary tendencies of the domestic economy.”

Franklin High Yield Corporate ETF

Type: Tactical
Style: High-yield bond
Assets under management: $1.2 billion
SEC yield: 6.5%*
Expense ratio: 0.40%, or $4.00 annually on a $1,000 investment

What is FLHY?

Franklin High Yield Corporate ETF (FLHY) is an actively managed bond ETF that typically focuses on corporate debt with below-investment-grade ratings (aka "high yield," aka "junk"). A team of managers focuses on fundamentals and has an eye for the relative long term (three to five years).

What does FLHY hold?

The ETF's managers—Bryant Dieffenbacher, Glenn Voyles, Jonathan Belk, and Robert Salvin—currently spread their assets across about 290 holdings, which is tighter than you'll get out of comparable index funds. While the portfolio is concentrated in U.S. bonds, it's not entirely domestic, with the team holding a roughly 15% slug of international corporate debt (mostly European).

Credit quality is naturally low, with about half of assets invested in BB bonds (the highest level of junk debt) and another 35% in B-rated bonds. That's a little riskier than some of the larger junk index funds, but it's not going out over a ledge.

The portfolio's average weighted maturity (how long until the bonds mature) is 3.9 years, while duration (a measure of risk) is 3.0 years. The latter implies that for every 1-percentage-point increase in market interest rates, the fund would experience a short-term decline of 3%, and vice versa.

Why should you consider FLHY?

Markets largely expected the Federal Reserve to deliver several interest-rate cuts in 2026, but inflation pressure have caused the central bank to stay its hand. Indeed, the Fed ended up raising its rate by a quarter-point in September, and futures markets indicate a better-than-95% chance that the central bank will do so at least once more by the end of the year.

"Expectations of steepening yield curves no longer characterize fixed income markets. Instead, investors are confronting a period of 'bear flattening,' in which shorter- term yields rise more rapidly than longer-term yields," says the Franklin Templeton Institute in its 2026 outlook. "While this environment presents challenges for duration-sensitive investors, it also creates attractive income opportunities. ... Corporate bond markets also remain attractive. Strong corporate profitability and healthy balance sheets suggest that credit spreads should remain relatively stable despite changing expectations for central bank policy. Consequently, investors can benefit from higher levels of income without assuming excessive credit risk.

"Within credit markets, U.S. high-yield bonds are particularly appealing, offering all-in yields above 6% with minimal duration exposure."

FLHY fits that bill for that kind of coverage, and under the watchful eye of seasoned managers. That could make it one of the best ETFs for the rest of 2026.

* SEC yield reflects the interest earned across the most recent 30-day period. This is a standard measure for funds holding bonds and preferred stocks.

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