No one knows when or why the next stock market sell-off will occur. But we do know that market downturns are part of the price of admission for unlocking the long-term gains of the stock market.
A correction, which is defined as a drop of at least 10% from a high, happens about every 1.85 years. A bear market, which is a drawdown of at least 20%, happens about every 3.6 years. This means that about half of all corrections evolve into bear markets, so investors with at least a three- to five-year time horizon should be prepared for a bear market.
By investing in companies with strong business models and reasonable valuations, you can position your portfolio to outlast a bear market. Exchange-traded funds (ETFs) invest in dozens, if not hundreds, of companies at once — further reducing volatility.
Here’s why the Vanguard S&P 500 Value ETF(NYSEMKT: VOOV), the Vanguard Russell 2000 Value ETF (NASDAQ: VTWV), and the Vanguard Consumer Staples ETF(NYSEMKT: VDC) are all worth buying in 2025, even if there’s a stock market sell-off.
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The fund targets value-focused companies like Berkshire Hathaway, JPMorgan Chase, ExxonMobil, Walmart, and more. Many top holdings in the fund are known for returning value to shareholders through dividends or buybacks. For example, Berkshire Hathaway famously doesn’t pay a dividend but regularly repurchases its stock to reduce the share count and grow earnings per share.
By not investing in high-flying growth stocks, the Vanguard S&P 500 Value ETF achieves a lower valuation and a higher yield than the S&P 500. The ETF has a price-to-earnings ratio (P/E) of 20.3 and a dividend yield of 1.9%, compared to a 27.6 P/E and 1.2% yield for the Vanguard S&P 500 ETF, which tracks the performance of the index.
Compared to the S&P 500, the Vanguard S&P 500 Value ETF is more concentrated in lower growth, lower valuation sectors like utilities, healthcare, and financials.
By not holding top tech stocks like Apple, Microsoft, or Nvidia, consumer discretionary leaders like Amazon or Tesla, or communications giants like Alphabet and Meta Platforms, the Vanguard S&P 500 Value ETF is considerably underweight technology, consumer discretionary, and communications, relative to the S&P 500.
Value stocks tend to be priced based on solid existing earnings growth rather than potential growth. These are the types of companies that have already endured past recession and economic cycles and are well-positioned to do it again. Therefore, investors in the Vanguard S&P 500 Value ETF can rest easy knowing they’re putting their hard-earned savings to work in quality businesses.
The Vanguard Russell 2000 Value ETF is as diversified as it gets when it comes to low-cost funds. This ETF has 1,446 holdings, and no single stock makes up more than 0.6% of the fund. Its top holdings are likely unrecognizable to most investors. Rather than target flashy names, the fund invests in value stocks of different sizes across the U.S. stock market.
The fund is similar to the Vanguard Russell 2000 ETF, which tracks the small-cap stock-focused Russell 2000 index. The Vanguard Russell 2000 Value ETF has fewer holdings because it filters out over 500 small-cap growth stocks.
The Vanguard Russell 2000 Value ETF is a good fit for folks who want to put capital to work in the market without centering around a particular investment thesis. Unlike other Vanguard ETFs that are highly concentrated in a handful of names, the Vanguard Russell 2000 Value ETF is so diversified that it doesn’t have clear leadership.
Sometimes, too much diversification can be a bad thing because an exceptional outperformance from a single stock can get lost in the wash. For example, the highest-weighted stock in the Vanguard Russell 2000 Value ETF could increase threefold in a single year and wouldn’t even move the index by 2%.
However, the fund could be a great fit for folks looking for a general basket of value stocks and passive income. The ETF sports a P/E ratio of just 14.2 and a yield of 1.7%. The diversification and value focus of the Vanguard Russell 2000 Value ETF makes it a good fit for folks who are worried about a stock market sell-off.
This ETF mirrors the performance of the consumer staples sector. Unlike the highly diversified Vanguard Russell 2000 Value ETF, the Vanguard Consumer Staples ETF is centered around just a handful of holdings, with 46% of the fund invested in Costco Wholesale, Procter & Gamble, Walmart, and Coca-Cola.
In general, the consumer staples sector is relatively recession-resistant, compared to other more cyclical sectors vulnerable to economic cycles. Demand for goods sold at retailers like Costco or Walmart or produced by P&G or Coke enjoy steady demand no matter what the economy is doing. This dynamic is in stark contrast to sectors like consumer discretionary or industrials, which benefit from an influx of capital and consumer spending.
The consumer staples sector is unlikely to keep pace with a growth-driven rally in the broader market but can perform well during a stock market sell-off. Even if there’s an economic slowdown, leading consumer staples companies should still be able to hold earnings steady or even achieve slight growth, whereas other sectors may see drastic fluctuations in corporate profits.
The Vanguard Consumer Staples ETF has a P/E that’s lower than the S&P 500 (24.8) and a yield that’s higher than the S&P 500 at 2.5%. Add it all up, and this fund is a good way for value investors to collect passive income from a diversified portfolio of companies.
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JPMorgan Chase is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Costco Wholesale, JPMorgan Chase, Microsoft, Nvidia, Tesla, Vanguard S&P 500 ETF, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
3 Ultra-Safe Vanguard ETFs to Buy, Even If There’s a Stock Market Sell-Off in 2025 was originally published by The Motley Fool
