3 Ultra-Safe Vanguard ETFs to Buy, Even If There's a Stock Market Sell-Off in 2025 – The Motley Fool

No one knows when or why the next stock market decline will occur. But we know that market downturns are part of the price of admission to unlock long-term gains in the stock market.

A correction is defined as a decline of at least 10% from a high and occurs approximately every 1.85 years. A bear market, a drawdown of at least 20%, occurs approximately every 3.6 years. This means that about half of all corrections develop into bear markets, so investors looking out at least three to five years should be prepared for a bear market.

By investing in companies with strong business models and reasonable valuations, you can position your portfolio to withstand a bear market. Exchange-traded funds (ETFs) invest in dozens, if not hundreds, of companies at once, further reducing volatility.

Here's why: Vanguard S&P 500 Value ETF (Veuve 0.10%), Vanguard Russell 2000 Value ETF (VTWV 0.56%),and Vanguard Consumer Staples ETF (VDC 0.19%) They're all worth buying in 2025, even if the stock market falls.

1. Vanguard S&P 500 Value ETF

The fund targets value-oriented companies such as: Berkshire Hathaway, JP Morgan Chase, exxon mobil, walmartetc. Many of the fund's top holdings are known for returning value to shareholders through dividends and share buybacks. For example, Berkshire Hathaway famously does not pay a dividend, but it regularly buys back its own shares to reduce the number of shares and increase earnings per share.

By not investing in high-growth stocks, it has a lower valuation and higher yield than the Vanguard S&P 500 Value ETF. S&P500. This ETF has a price-to-earnings ratio (PER) of 20.3 times and a dividend yield of 1.9%, while the ETF has a P/E ratio of 27.6 times and a dividend yield of 1.2%. Vanguard S&P 500 ETFtrack index performance.

Compared to the S&P 500, the Vanguard S&P 500 Value ETF is concentrated in sectors with lower growth rates and lower valuations, such as utilities, healthcare, and financials.

Data source: Vanguard.

By not owning top tech stocks like apple, microsoftor Nvidialike the leader in consumer discretion. Amazon or teslaor a major telecommunications company. alphabet and meta platformThe Vanguard S&P 500 Value ETF is significantly underweight in technology, consumer staples, and communications relative to the S&P 500.

Value stocks tend to be priced based on guaranteed growth in existing earnings rather than potential growth. These companies have already withstood past recessions and economic cycles and are well-positioned to do so again. Therefore, investors in the Vanguard S&P 500 Value ETF can rest assured that they are investing their hard-earned savings in a quality business.

2. Vanguard Russell 2000 Value ETF

The Vanguard Russell 2000 Value ETF is as diversified as possible for a low-cost fund. This ETF holds 1,446 stocks, with no stock accounting for more than 0.6% of the fund. Its top holdings are probably unrecognizable to most investors. Rather than targeting flashy stocks, the fund invests in value stocks of various sizes across the U.S. stock market.

The same goes for funds. Vanguard Russell 2000 ETFwhich tracks the Russell 2000 index, which focuses on small-cap stocks. The Vanguard Russell 2000 Value ETF excludes over 500 small-cap growth stocks, so it has fewer holdings.

The Vanguard Russell 2000 Value ETF is suitable for those who want to leverage their capital in the markets without focusing on a specific investment theme. Unlike other Vanguard ETFs, which are highly concentrated in a small number of stocks, the Vanguard Russell 2000 Value ETF is highly diversified, so there is no clear leadership.

In some cases, too much diversification can be a bad thing, as the superior performance of a single stock can be washed away. For example, the Vanguard Russell 2000 Value ETF's most heavily weighted stock could triple in one year, while the index would move less than 2%.

But this fund may be a good fit for those looking for a general basket of value stocks and passive income. This ETF has a P/E ratio of just 14.2x and a yield of 1.7%. The Vanguard Russell 2000 Value ETF focuses on diversification and value, making it a good choice for those worried about stock market declines.

3. Vanguard Consumer Staples ETF

This ETF reflects the performance of the consumer staples sector. Unlike the highly diversified Vanguard Russell 2000 Value ETF, the Vanguard Consumer Staples ETF is structured around just a handful of holdings, with 46% of the fund invested. costco wholesale, procter and gambleWalmart, and coca cola.

In general, the consumer staples sector is relatively recession-proof compared to other cyclical sectors that are more susceptible to business cycles. Demand for products sold at retailers such as Costco and Walmart, and products manufactured by Procter & Gamble and Coke, is stable regardless of economic conditions. This movement is in stark contrast to the consumer and industrial sectors, which benefit from inflows of capital and consumer spending.

The consumer staples sector is unlikely to keep up with the overall market's growth-driven rally, but it can perform well during stock market downturns. Even if the economy slows, major consumer staples companies should be able to maintain stable profits or even achieve modest growth, while profits in other sectors may fluctuate widely.

The Vanguard Consumer Staples ETF has a lower P/E than the S&P 500 (24.8) and a higher yield of 2.5%. Add it all up, and this fund is a good way for value investors to collect passive income from a diverse portfolio of companies.