We've already seen a much different market in 2026 than the one we experienced from 2023 to 2025. No longer is tech dominating the discussion. Cyclicals are broadly outperforming the S&P 500, small caps have gotten off to a roaring start, and precious metals continue last year's rally.
Given the concentration issue alone, I think investors should consider adjusting any large-cap or tech-heavy allocations. Market breadth has improved considerably and investors may want to focus on diversification this year.
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That doesn't have to mean major allocation changes though. One ETF which provides that shift is the Vanguard Total Stock Market ETF (VTI 0.09%). As the name suggests, it goes far beyond the S&P 500 and invests in the entire investable U.S. equity market, all 3,500+ stocks. Because it's market-cap-weighted, you still get the large-cap overweight, but the overall portfolio ends up including about a 22% allocation to mid- and small-caps. That's enough of a tilt to enhance diversification benefits and help capture any rotation into smaller companies.
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And it's because of that diversified approach to the U.S. equity market that the fund becomes an ideal candidate to buy and hold forever. The 35% allocation to the "Magnificent Seven" stocks in the S&P 500 is looking a bit more dangerous at the moment as momentum cools and economic concerns rise. The Vanguard Total Stock Market ETF still maintains that U.S. large-cap bias, but reduces concentration risk a bit and adds the potential of long-unloved small caps to the mix.
Not only does that make it an ETF I'll continue adding in 2026, but it's one I'll keep holding on to indefinitely.
