Key Points
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Many investors are concerned about potential market volatility.
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ETFs can help diversify your portfolio and limit risk.
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A growth ETF can set you up for significant returns over the long term.
Americans have no shortage of concerns around the economy right now.
Nearly half of investors are worried about the risk of a recession, according to The Motley Fool’s 2026 Investor Outlook and Predictions Report. Forty-five percent admit they’re concerned about stubbornly high inflation, while 37% are also worried about a weakening labor market.
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To be clear, nobody knows how the market will perform for the remainder of 2026. But it never hurts to prepare for potential volatility anyway, and there are three Vanguard exchange-traded funds (ETFs) I’m loading up on to set my portfolio up for long-term success.
Silhouette of a bear against stock market charts.
Image source: Getty Images.
1. Vanguard Total Stock Market ETF
The Vanguard Total Stock Market ETF (NYSEMKT: VTI) aims to track the market as a whole, with a whopping 3,511 stocks across all sectors of the market.
Broad-market funds like this can provide extra protection against market volatility. With so many stocks, it’s less likely that a single company will significantly sway the ETF’s performance. Even if an entire industry is hit especially hard, there are thousands of other stocks from more established sectors to help provide stability.
For investors who are worried about an artificial intelligence (AI) bubble, the diversification found in broad-market funds like the Vanguard Total Stock Market ETF can help limit the impact of tech industry volatility.
2. Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF (NYSEMKT: VOO) is similar to the Total Stock Market ETF in that it’s a broad fund tracking a major market index. However, while the Total Stock Market ETF contains over 3,000 stocks of all sizes, the S&P 500 ETF holds only large-cap stocks from 500 companies.
Investing solely in large-cap stocks can help hedge against risk, as larger companies are more likely to pull through downturns and earn positive returns over decades.
Historically, the S&P 500 ETF and Total Stock Market ETF have experienced similar levels of volatility. Their maximum drawdowns — which is the largest percentage drop from an ETF’s peak to its lowest point in a given period — are 35% and 34%, respectively, over the last 10 years.
Of course, past performance can’t predict future returns, so there’s no way to know exactly how either fund will perform going forward. But the Vanguard S&P 500 ETF can be a smart choice for those looking to invest in the largest and strongest U.S. companies.
3. Vanguard S&P 500 Growth ETF
The Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) carries more risk than the other two funds on this list, but it also has the greatest earning potential.
This fund holds only 140 stocks, nearly half of which are from the technology sector. While it tracks the S&P 500, it contains only stocks from the index with the most growth potential. This results in less risk than many other growth ETFs, as all of the stocks in this fund are S&P 500 industry leaders, but it can also earn you higher-than-average returns over time.
In the event of a recession or market crash, this ETF could experience significant drawdowns. However, it could significantly outperform broader ETFs over time. In fact, over the last 10 years, the Vanguard S&P 500 Growth ETF has earned an average annual return of 17.20%, compared to around 15% for each of the other two ETFs on this list.
If you were to invest, say, $200 per month in each of these three ETFs while earning returns in line with each fund’s 10-year annual average, here’s approximately how that would add up over time:
|
Number of Years |
VTI-Total Portfolio Value: 15.04% Avg. Annual Return |
VOO-Total Portfolio Value: 15.46% Avg. Annual Return |
VOOG-Total Portfolio Value: 17.20% Avg. Annual Return |
|---|---|---|---|
|
20 |
$247,000 |
$260,000 |
$320,000 |
|
25 |
$514,000 |
$549,000 |
$724,000 |
|
30 |
$1,052,000 |
$1,143,000 |
$1,617,000 |
Data source: Author’s calculation via investor.gov.
Again, past performance doesn’t predict future returns, and the Vanguard S&P 500 Growth ETF is more likely to experience significant volatility during a market downturn. But market slumps are some of the most affordable times to buy ETFs like this, making it a prime time to stock up.
The right ETF for you will depend on your goals and risk tolerance. Broad-market ETFs can mitigate risk and limit the impact of volatility, while growth ETFs can maximize your earnings over time. By preparing your portfolio now, you’ll be ready for whatever the market may have in store.
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Katie Brockman has positions in Vanguard Admiral Funds-Vanguard S&P 500 Growth ETF, Vanguard S&P 500 ETF, and Vanguard Total Stock Market ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF and Vanguard Total Stock Market ETF. The Motley Fool has a disclosure policy.