Karee Venema
Vanguard funds are known as practical tools for the buy-and-hold-forever crowd. Their straightforward strategies, broad portfolios and generally low costs are conducive to investors who want to sit back and let compounding do the work for a decade or two.
But in a pinch, the safest Vanguard funds can also be used to play a little defense – something investors could very well use in the current market environment.
The S&P 500 is down nearly 5% so far in 2025 and briefly entered correction territory in March. Uncertainty around the Trump administration's tariff policies has sparked a "resurgence of emotional-driven selling," says Mark Hackett, chief market strategist at Nationwide.
"Wall Street strategists have begun to capitulate on their year-end targets," he adds, with "UBS warning of another 8% decline, while HSBC downgraded their view of U.S. stocks."
How we chose the safest Vanguard funds
To find the safest Vanguard exchange-traded funds (ETFs) and mutual funds for a volatile market, we looked for those that represent some of the most useful defensive sectors and strategies, including those that contain the best dividend stocks or the best health care stocks.
We also targeted funds that boast Vanguard's below-average expenses. "True, some competitors can now match or even undercut Vanguard on fees for broad market exposure," writes Alec Lucas, director of manager research and active funds research for Morningstar. "But Vanguard's burgeoning advice business could help it keep or even extend that lead."
Just remember the rub when it comes to positioning your portfolio for volatility: Markets will eventually stabilize Indeed, in the same note, Hackett noted that corporate earnings are expected to grow by double digits in the next 12 months and many stress indicators such as the Cboe Volatility Index (VIX) have steadied.
So if you do jump into the safest Vanguard funds for short-term defense, pay attention and be nimble.
With that in mind, here are five of the safest Vanguard funds to own in a volatile market. When applicable, we'll let you know when these portfolios come in both ETF and mutual fund form.
Data is as of March 28. Dividend yields represent the trailing 12-month yield, which is a standard measure for equity funds.
Vanguard Health Care ETF
- Type: Sector (Health Care)
- Assets under management: $16.4 billion
- Dividend yield: 1.4%
- Expenses: 0.09%, or $9 annually for every $10,000 invested
- Also available as: Vanguard Health Care Index Fund Admiral Shares (VHCIX, 0.09% expenses, $100,000 minimum investment)
Health care stocks are known for there defensive qualities because of the essential services they provide. If money's tight, you can put off buying a VR headset or a trip to the Bahamas, but you can't exactly go off your medications and avoid the doctor.
And health care spending is projected to grow at a pace that far outpaces inflation. According to the Centers for Medicare & Medicaid Services (CMS), national health expenditures are expected to grow at an average annual rate of 5.6% through 2032.
That's why the Vanguard Health Care ETF (VHT) is one of the safest Vanguard funds to own on a volatile market. Among the best Vanguard ETFs, it's an extremely cost-efficient way to diversify, giving you access to some 410 health care stocks for a mere 9 basis points in annual fees.
VHT is market cap-weighted, which means the larger a company is by market capitalization, the more assets the fund will invest in its shares. Thus, mega- and large-cap stocks have the biggest impact on performance, at nearly 80% of the fund's weight.
But you also enjoy some exposure to mid- and small-cap stocks, which allows you to benefit from explosive smaller biotech and biopharma names that can take off on events such as drug-trial results and M&A.
Top holdings include insurer UnitedHealth Group (UNH) and pharmaceutical names Eli Lilly (LLY) and AbbVie (ABBV).
Sponsored Content
Vanguard Consumer Staples ETF
- Type: Sector (Consumer Staples)
- Assets under management: $7.3 billion
- Dividend yield: 2.2%
- Expenses: 0.09%
- Also available as: Vanguard Consumer Staples Index Fund Admiral Shares (VCSAX, 0.09% expenses, $100,000 minimum investment)
Consumer staples is another sector that tends to be more resilient during volatile markets for the same reason as health care.
If you're in a money crunch, you'll look at a lot of different ways to cut back. You might go to the movies less. You might not go out to restaurants as much. Maybe you'll pare down your five streaming services to four.
In fact, you'll look at spending less on just about anything before you cut back on consumer staples such as toilet paper, toothpaste and basic grocery essentials.
That's why the Vanguard Consumer Staples ETF (VDC) is among the safest Vanguard funds for market uncertainty.
This ETF provides exposure to more than 100 companies that specialize in human necessities. Procter & Gamble (PG) tackles everything from facial care to tooshie wipes. Mondelez International (MDLZ) sells a bevy of cheap snacks – think Chips Ahoy! and Ritz Crackers – that are mainstays in American pantries.
It also holds Walmart (WMT), Costco Wholesale (COST) and Target (TGT), which sell all of these items.
You'll also find companies like Marlboro parent Altria (MO) and alcohol giant Constellation Brands (STZ). While you might not consider cigarettes and alcohol to be "necessities," people are just as loath to cut back on them as they are other staples.
And like many Vanguard ETFs, VDC can be had at an absolute song: Expenses are just 9 basis points per year.
Sponsored Content
Vanguard High Dividend Yield ETF
- Type: Dividend stock
- Assets under management: $58.7 billion
- Dividend yield: 2.6%
- Expenses: 0.06%
- Also available as: Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX, 0.08% expenses, $3,000 minimum investment)
The best dividend stocks have historically outperformed their non-dividend-paying counterparts during market uncertainty.
According to Merrill, dividend stocks can be "particularly useful when markets are volatile." For one, the private wealth management firm says, they provide investors with income, which can help meet their liquidity needs.
Additionally, "dividend-focused investing has historically demonstrated the ability to help to lower volatility and buffer losses during market drawdowns," Merrill adds.
With this in mind, investors may want to consider the Vanguard High Dividend Yield ETF (VYM), which tracks an index of high-yielding dividend stocks. On a total-return basis (price plus dividends), the S&P 500 has lost nearly 5% since the start of the year. VYM is up 0.6%.
This Vanguard fund boasts a wide portfolio of 520 or so high-yielding stocks that collectively yields 2.6% at present. (That's roughly double the S&P 500.)
It's worth noting that, at 23% of assets, financial stocks – not really considered safety plays – are the best-represented sector in VYM. But the traditionally defensive health care (11.5%) and consumer staples (10.7%) sectors also carry significant weight in the portfolio.
Top dividend payers in the portfolio right now include blue chip stocks such as Home Depot (HD), Exxon Mobil (XOM), and JPMorgan Chase (JPM).
Sponsored Content
Vanguard Global Minimum Volatility Fund Investor Shares
- Type: Minimum-volatility global stock
- Assets under management: $2.1 billion
- Dividend yield: 1.8%
- Expenses: 0.21%
Among the most popular ways to fight off a turbulent market are low-volatility (and minimum-volatility) ETFs.
"What's the difference?" Low-volatility ETFs evaluate a universe of stocks and pick out the ones that have shown the least volatility over a certain period of time, hoping to create the lowest-volatility portfolio it can.
Minimum-volatility ETFs typically try to minimize volatility within a certain benchmark, while still resembling the original benchmark in some way.
For instance, an S&P 500 low-vol fund that picks the 20 lowest-volatility stocks in the index might end up holding nothing but utility stocks.
However, an S&P 500 min-vol fund might try to identify low-volatility stocks, but it might be forced to have at least some percentage invested in all 11 sectors – resulting in a portfolio that's not as volatile as the S&P 500, but possibly not as calm as a low-vol fund.
Vanguard doesn't have many options for investing in either type of strategy, but one that does its job is the Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX). This actively managed fund aims to provide minimum volatility compared to the global equity market.
Like most global funds, VMVFX dedicates the bulk of its assets (64%) to American stocks, with the rest spread across several other countries such as the U.K., Canada and India.
From a construction standpoint, VMVFX exemplifies the minimum-volatility mindset. Its sector allocation looks somewhat similar to the category average, but with a few tweaks reflecting its goal of reducing volatility.
For instance, it holds a few more percentage points of health care (16%) and consumer staples (11%) than the category average, but a little less technology (19%) and consumer discretionary (6%).
There is a $3,000 minimum investment for this Vanguard fund.
Sponsored Content
Vanguard Ultra-Short Bond ETF
- Type: Ultra-short bond
- Assets under management: $4.9 billion
- SEC yield: 4.7%*
- Expenses: 0.10%
We mentioned earlier that when the market's a mess, investors seek out income. That can include dividend stocks, but it often includes bonds, too.
Listen: Bonds don't hold a candle to stocks when it comes to long-term returns. But they provide much more stability, serve a vital role in protecting your savings and can produce a decent return from their interest payments.
One of the safest bets you can make in bonds, if you're just looking to protect your money in a down market, is short-term debt.
Typically, the shorter the payback term for a bond, the less uncertainty there is that debt will be paid off – a lot more can happen during the life of a 30-year bond than during the life of a one-year bond.
Enter the Vanguard Ultra-Short Bond ETF (VUSB), which holds bonds that mature in less than two years.
The Vanguard Ultra-Short Bond ETF is an ultimate example of how useful cheap index funds are. Individual bonds are extremely difficult to research, and they're not exactly easy to buy, either.
But with VUSB, you're plugged into a Vanguard-run portfolio of some 850 different debt issues – an instant diversified fixed-income portfolio for just 10 basis points a year.
Another reason VUSB is on this list of safest Vanguard funds? Virtually the entire portfolio boasts investment-grade ratings, which basically means there's an extremely high likelihood that these bonds will be fully repaid.
How steady is VUSB? Shares are up 1.3% for the year to date.
Learn more about VUSB at the Vanguard provider site.
* SEC yield reflects the interest earned for the most recent 30-day period after deducting fund expenses. SEC yield is a standard measure for bond funds.
Related content
Sponsored Content
-
Despite Economic Uncertainty, Americans Remain Confident About Retirement, Survey ShowsSaving and spending is a concern but most workers and retirees think they are on track based on a new survey.
-
Verizon’s Free iPhone Deal: What to Know Before You Switch or UpgradeVerizon is offering a free smartphone — including the latest iPhones — with any myPlan, plus a three-year price lock. But is it really the best deal for you?
-
Stock Market Today: Dow Drops 971 Points as Powell Pressure Ramps UpPresident Trump is increasing his attacks against Jerome Powell, insisting the Fed chair cut interest rates.
-
Stock Market Today: No 'Powell Put'? No ProblemInvestors, traders and speculators look beyond both another Trump post and more signs of slowing economic activity.
-
Stock Market Today: Stocks Gain on Tech, Auto Tariff TalkThe Trump administration said late Friday that it will temporarily halt tariffs on some Chinese tech imports.
-
Stock Market Today: Stocks Surge to Close a Volatile WeekIt was another day with a week's worth of both news and price action, but it ended on a strongly positive note.
-
Which Stocks Stayed Green as the Market Plummeted?Only a handful of S&P 500 stocks managed to generate gains during the market's historic four-day plunge.
-
Stock Market Today: Uncertainty Proliferates: Dow Loses 1,014 PointsWeaker-than-expected consumer inflation data wasn't enough to stabilize sentiment during another volatile day for financial markets.
-
Stock Market Today: Tariff Talks Drive Another Up-and-Down DayTrade war negotiations are happening, but the "fear gauge" is gyrating, and investors, traders and speculators are still searching for signs of a bottom.
-
What to Do With Your Tax Refund: 6 Ways to Bring GrowthUse your 2024 tax refund to boost short-term or long-term financial goals by putting it in one of these six places.
