Investors are increasingly recognizing the advantages of diversified exchange-traded funds (ETFs) as a strategy to maintain their holdings during periods of market volatility. As of today, if the calendar year were to conclude, the S&P 500 index would be experiencing an impressive gain of over 15% for 2025, following remarkable increases of over 20% in both 2024 and 2023. Historically, the S&P 500 has delivered average annual total returns ranging between 9% and 10%.
Several factors contribute to the rapid ascension of the S&P 500, notably the strong performance of sector giants like Nvidia and 19 other key stocks that collectively represent roughly half of the index’s value. These companies have reported robust earnings growth and maintain high profit margins, prompting investor interest.
For those looking to diversify their portfolios, Vanguard stands out by offering some of the most economical ETFs in the market. The investment management firm can afford to keep fees low because of its vast asset management capabilities.
Three standout options from Vanguard include the Vanguard Total Stock Market ETF, the Vanguard Value ETF, and the Vanguard Consumer Staples ETF, all of which present compelling investment opportunities even in the event of a market downturn in 2026.
Vanguard Total Stock Market ETF
As the world’s largest ETF, the Vanguard Total Stock Market ETF boasts over $2 trillion in net assets, reflecting its capacity to capture a broad slice of the U.S. stock market. Unlike the S&P 500, which focuses primarily on large-cap stocks, this ETF includes thousands of companies that are not in the index, accounting for approximately 16% of the total U.S. stock market.
Long-term performance trends suggest that while the Total Stock Market ETF may mirror the trajectory of the S&P 500, it offers a more comprehensive exposure to the entire market. This characteristic is particularly appealing to investors wary of potential sell-offs since many smaller companies are currently trading at lower valuations than the high-flying tech giants. Additionally, the psychological comfort of owning a diversified ETF may help investors hold on through turbulent market conditions.
Vanguard Value ETF
For those wanting to mitigate tech exposure, the Vanguard Value ETF emerges as an attractive option. This fund excludes major tech players and focuses instead on leading companies in the financial, industrial, and healthcare sectors. Key holdings include JPMorgan Chase, Berkshire Hathaway, ExxonMobil, Johnson & Johnson, and Walmart.
Value stocks typically excel during market downturns because they are based on established earnings rather than speculative future growth. With a yield of 2.1% and a price-to-earnings (P/E) ratio of 21.2, this ETF offers a solid alternative to the Vanguard S&P 500 ETF, which has a lower yield and higher P/E ratio, making it particularly appealing to risk-averse investors seeking sustainable income.
Vanguard Consumer Staples ETF
Despite facing headwinds in 2025 due to changing consumer spending patterns, the Vanguard Consumer Staples ETF remains an excellent investment choice for those emphasizing value. Featuring a yield of 2.2% and a P/E ratio of 23.6, this fund includes trusted names like Walmart, Costco Wholesale, Procter & Gamble, Coca-Cola, and PepsiCo, which collectively constitute over half of its assets.
These blue-chip companies are well-equipped to weather economic downturns thanks to their robust supply chains and pricing power. Historical performance suggests that during market sell-offs unrelated to consumer staples, this ETF has outperformed the broader market, highlighting its resilience.
Integrating ETFs into Investment Portfolios
In an era of low-cost ETFs, investors can strategically use these financial instruments to complement their portfolios. For instance, those concentrated in high-growth sectors like artificial intelligence can use ETFs like the Vanguard Value or Consumer Staples ETFs to introduce dividend-paying stocks into their mix. Conversely, the Vanguard Total Stock Market ETF serves as a convenient way to invest broadly without the hassle of monitoring individual stock performance.
Navigating potential market volatility does not have to involve panic-driven decisions. A more prudent approach lies in aligning investments with risk tolerance, maintaining holdings during market fluctuations, and focusing on long-term growth through compounding returns.
