Worried About the Stock Market? These 3 Vanguard ETFs Can Be No-Brainer Buys Before the End of 2026

Source Motley_fool

Key Points

  • Vanguard funds are known for their low fees and excellent diversification.

  • The funds listed here have been doing well this year and can be attractive options for investors who are worried about the broader markets.

  • 10 stocks we like better than Vanguard High Dividend Yield ETF ›

The S&P 500 has been starting to experience a pullback. In the past month, the broad index has fallen by around 2.6%. It's not a massive decline, but it comes at a time when investors are growing concerned about the prospect of not only one but potentially multiple rate hikes, which could result in a further decline for the index.

Whether or not a full-blown crash ends up happening in the near future, I do think it's a good time for investors to start thinking about the exposure they have to highly valued stocks, which could be due for corrections.

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Vanguard exchange-traded funds (ETFs) can be great options to consider right now, as they can provide investors with diversification and stability in the long run, while charging minimal fees.

Three Vanguard ETFs that I think can be excellent options for investors who are worried about the market include the Vanguard High Dividend Yield ETF (NYSEMKT:VYM), the Vanguard Morningstar Value ETF (NYSEMKT:VTV), and the Vanguard Energy Index Fund ETF (NYSEMKT:VDE). These funds all have expense ratios of less than 0.1%. Here's why they could be great buys right now.

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Vanguard High Dividend Yield ETF

As its name suggests, investors who invest in the Vanguard High Dividend Yield Index Fund ETF are going to collect a fairly high yield. At 2.2%, it isn't astronomical, but it's still about double what the S&P 500 is averaging these days -- just 1.1%. It's a sign of the times and just how expensive stocks have become. As stock prices rise, yields come down.

This Vanguard fund offers a solid mix of dividend stocks that can provide investors with excellent stability. Some of the top stocks in this ETF include JPMorgan Chase, ExxonMobil, and Johnson & Johnson. These are the types of stocks that are known for being good options for dividend investors.

This year, the Vanguard High Dividend Yield Index Fund has risen by more than 12% (without including its dividend), slightly outperforming the S&P 500, as investors have been gravitating toward safer stocks. Between the value it offers and the above-average dividend, this can make for a terrific long-term investment to build any portfolio around.

Vanguard Morningstar Value ETF

Another solid ETF for investors to consider is the Vanguard Morningstar Value ETF. It offers a yield of 1.8%, which is a bit lighter than the previous fund. However, this fund's focus is more on value stocks, which trade at relatively modest valuations and thus can reduce risk for investors. There are similar names in this fund as there are in the previous fund, as there will inevitably be some overlap, as many dividend stocks also make for quality value stocks.

Year to date, this ETF has generated better returns than the previous dividend-focused ETF, as it's up around 17%. A big reason why is that its largest holding, Micron Technology, has performed exceptionally well. However, at just under 4% of the fund's portfolio, it's still not a fairly large position overall.

For investors who are willing to sacrifice some dividend income in order to prioritize value, this ETF may be a more ideal option to consider.

Vanguard Energy ETF

Rounding out this list of top Vanguard funds is the Vanguard Energy ETF. This ETF's focus is to give investors exposure to the top energy stocks. ExxonMobil and Chevron are its top two holdings, and together, they account for more than one-third of the entire portfolio.

Energy stocks can be highly attractive options to own in times of adversity, as these types of businesses generate fairly consistent demand for their products and services. This year, the Vanguard Energy Index Fund has risen by 46%. And back in 2022, when the S&P 500 crashed more than 19%, this ETF was up over 56%.

The fund also offers a fairly attractive dividend, yielding 2.2%, in line with the Vanguard High Dividend Yield ETF. There will inevitably be some risk with this fund given its exposure to commodity prices, but for investors looking for a way to diversify, it can be a highly attractive ETF to consider right now.

Should you buy stock in Vanguard High Dividend Yield ETF right now?

Before you buy stock in Vanguard High Dividend Yield ETF, consider this:

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JPMorgan Chase is an advertising partner of Motley Fool Money. David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron, JPMorgan Chase, Micron Technology, Vanguard High Dividend Yield ETF, and Vanguard Morningstar Value ETF. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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