For developed foreign market exposure, the WisdomTree International Dividend ex-Financials ETF ( DOO) has benefited from avoiding ground zero for the financial crisis: the large European banks.

In 2011 it is down 11%, vs. a decline of 15% for EFA. Anyone considering this fund would need to believe that nonfinancial stocks in Europe will do well in 2012 and beyond, because DOO allocates 21% to the U.K., 11% to France and another 27% to other eurozone countries.

DOO should be less volatile than EFA, however, because telecom and utilities are the two largest sectors, accounting for 30% of the fund. The trailing yield on DOO is 4.7%, vs. 3.3% for EFA.

The EG Shares Low Volatility Emerging Market Dividend ETF ( HILO) has outperformed the iShares MSCI Emerging Market Index Fund ( EEM) by more than five percentage points and done so with less volatility.

The yield for HILO is indicated at a bit less than 6%, but the actual payout remains to be seen because there has been only one small dividend paid thus far.

There is even a low-volatility domestic small-cap fund: the Russell 2000 Low Volatility ETF ( SLVY).

Like the other funds, SLVY is new and has performed better than its counterpart -- the iShares Russell 2000 ETF ( IWM) -- with less volatility. It is also indicated to yield a little more than IWM.

The reason to mention the yields on the funds is that during years that the market goes up a lot, the low-volatility funds should be expected to lag. The yield pickup offered by the low-volatility funds will make up a portion of the gap.

The "explore" portion would be much smaller than the core at perhaps 15%-20%. This could include a combination of themes such as the global food shortage. Investors looking to play this particular them could invest in Terra Nitrogen ( TNH), a limited partnership that yields almost 9% but is very capable of leading the agriculture group to the upside when the group gains momentum.

Another theme might be the turnaround of China. The Chinese markets have turned in some lousy returns over the last couple of years, perhaps discounting an economic slowdown and other problems from overbuilding.

Anyone looking for a turnaround could look at the energy sector because demand for oil and coal continues to increase slowly as the middle class continues to emerge in China.

Of the oil majors, I would look at Sinopec ( SNP) for its refining and marketing presence and 3.3% yield. For anyone less interested in stock picking, the Global X China Energy ETF ( CHIE) would capture the effect if the space does well.

The above two themes are good examples, but the explore portion realistically should include at least half a dozen holdings to avoid concentration of risk.

Constructing a core-and-explore portfolio with low-volatility funds can achieve similar long-term result as regular cap-weighted ETFS but with smaller ups and downs along the way. (The providers of low-volatility ETFs have research available that demonstrates how this works.)

At the time of publication, Nusbaum had not positions in stocks mentioned.

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Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.

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