The right investment can help protect your money during a downturn.
The stock market has been causing quite the panic lately, as prices have fallen sharply in recent weeks. The S&P 500 (^GSPC 0.47%) is currently down by nearly 6% since mid-July, and many investors are worried it’s only going to get worse from here.
To be clear, there’s no way of knowing exactly what the market will do in the short term. Stocks could fall further, or this may end up being a short-lived slump with the worst already behind us.
The uncertainty of the market can often be the hardest part as an investor, so it’s normal to feel unnerved. But downturns can also be smart investing opportunities, as stocks are essentially on sale right now. By investing during the market’s rough patches, you can set yourself up for potentially lucrative gains during the recovery period.
Where you invest matters, though, because not all stocks will recover from downturns. While there are no guarantees in the stock market, there’s one exchange-traded fund (ETF) that’s about as close to guaranteed as you can get: the S&P 500 ETF.
The best ETF for risk-averse investors
Investing in the stock market is often compared to gambling, as you’re always taking a risk with your money. But that’s not necessarily true, especially if you invest in the right places. Doing your homework and buying quality stocks or funds gives you a much better chance of seeing positive returns over time.
One of the safest and most reliable investments out there is an S&P 500 ETF, such as the Vanguard S&P 500 ETF, SPDR S&P 500 ETF Trust, or iShares Cores S&P 500 ETF.
This type of investment is a collection of stocks that tracks the S&P 500 index. Each ETF contains stocks from 500 of the largest U.S. companies, ranging from tech giants like Apple and Microsoft to long-standing brands like Procter & Gamble and Coca-Cola.
Investing in an S&P 500 ETF is a fantastic way to build a diversified portfolio with minimal effort. With just a single investment, you’ll instantly own a stake in 500 companies across a wide variety of industries. And because the companies within the S&P 500 are among the strongest in the world, there’s an extremely strong chance they will recover from market downturns.
In fact, research shows that over the long haul, it’s next to impossible to lose money with an S&P 500 ETF. According to analysts at Crestmont Research, every 20-year period in the S&P 500’s history has ended in positive total returns.
This means that if you’d invested in an S&P 500 fund at any point in history and simply held it for 20 years — no matter what the market was doing during that time — you’d have made money. The S&P 500 has faced some extreme bear markets, recessions, and crashes throughout history, but it’s managed to recover from every single one so far.
One big downside to consider before you buy
No investment is perfect for everyone, and that includes the S&P 500 ETF. While it can be a strong choice for those seeking a safer investment with a long history of recovering from downturns, it may not necessarily be a good fit if you’re looking to earn above-average returns.
By definition, an S&P 500 ETF cannot beat the market. It’s designed to follow the market’s performance, so it can only ever earn average returns. If that’s a worthwhile trade-off for an investment that carries less risk and requires less effort, it could be a smart addition to your portfolio. Otherwise, you should maybe opt for individual stocks.
Investing in individual stocks requires more research, as you’ll need to study the companies behind each stock you’re interested in owning. Getting started can also be more expensive since you’ll need at least 25 to 30 stocks in your portfolio for proper diversification. However, this approach is also the best way to earn as much as possible in the stock market.
Whether or not you choose to invest in an S&P 500 ETF will depend on your goals and risk tolerance. This investment may not be the best fit for those looking to maximize their earnings. But if you just want a safer and more reliable fund that can get you through this downturn and those to come, the S&P 500 ETF is one of the best options out there.
Katie Brockman has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Apple, Microsoft, and Vanguard S&P 500 ETF. 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.