5 ETFs I'm Buying and Holding Through the Next Bear Market and Beyond

Bear markets happen more frequently than you think.

Over the past century, U.S. stocks have experienced a bear market roughly once every 3.5 years, with an average length of just over nine months. Since 1945, however, that frequency has dropped to once every five years.

Even with recent bear markets in 2022 and 2020, it's not safe to assume we're in the clear for a while. High interest rates, high inflation, and a war in Iran all pose threats to the current bull market that could trigger a reversal at almost any time.

Image source: Getty Images.

Since the timing is completely unknown, the solution for your portfolio isn't to move to cash. If you're concerned that a major pullback in the S&P 500 (SNPINDEX: ^GSPC) is imminent, tilting your portfolio toward a more defensive stance without significantly altering your long-term target asset allocation is a much better choice.

There are many ways to protect yourself. Some aim to limit downside. Some offer income. Some target segments of the market that are under the radar.

Here are five exchange-traded funds (ETFs) I'd consider today if you're looking for some bear market protection.

1. iShares MSCI USA Minimum Volatility Factor ETF

Objective: Limit downside risk with a lower-volatility portfolio

The iShares MSCI USA Minimum Volatility Factor ETF (NYSEMKT: USMV) is technically not a portfolio of low-volatility stocks in the traditional sense. It starts with a broad universe of stocks and runs them through an optimization process designed to produce the portfolio with the lowest overall volatility. That's how you get Microsoft (NASDAQ: MSFT) and Nvidia (NASDAQ: NVDA) as two of the top three holdings.

2. Vanguard Dividend Appreciation ETF

Objective: Reduce volatility with high-quality dividend growth stocks

Companies with long histories of paying and growing dividends tend to have stronger balance sheets and higher cash flows. Those are the types of businesses you want to own when the economy starts to struggle. The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) owns these companies that have increased their dividends for at least 10 consecutive years.

3. Avantis U.S. Small Cap Value ETF

Objective: Overweight a deeply undervalued segment of the market

With mega-cap tech stocks driving the market higher for most of the past four years, a lot of attractive corners of the market have been overlooked. The Avantis U.S. Small Cap Value ETF (NYSEMKT: AVUV) targets a very cheap group of stocks that are experiencing a real improvement in fundamentals. Plus, it includes a high profitability screen to help ensure that only quality stocks are being included.

4. iShares 0-3 Month Treasury Bond ETF

Objective: Lower risk and increase income

The upside of rising interest rates is that fixed income has become a much more attractive alternative to stocks. The iShares 0-3 Month Treasury Bond ETF (NYSE: SGOV) invests in risk-free Treasury bills with a current yield of 3.7%. I don't think you want to move your entire portfolio into something like this. But as an option to reduce total portfolio risk while still earning meaningful income on the side, it's not a bad opportunity.

5. Vanguard Total Stock Market ETF

Objective: Keep your portfolio core intact and ride it out

Maybe the best move for your portfolio is no move at all. The Vanguard Total Stock Market ETF (NYSEMKT: VTI) is always a great choice for the core of your portfolio. If the market drops 20% or more, continuing to invest systematically in stocks allows you to pick up shares at a discount. This creates an opportunity to improve your long-term returns once those shares start to see gains in an eventual rebound.

Each of these ETFs offers a unique way to approach a bear market. Whether it's reducing volatility, targeting value, raising cash, or buying the dip, these are better alternatives than panicking at the wrong time and rushing to the sidelines.

David Dierking has positions in Vanguard Dividend Appreciation ETF and Vanguard Morningstar Total Stock Market ETF. The Motley Fool has positions in and recommends Microsoft, Nvidia, Vanguard Dividend Appreciation ETF, and iShares Trust-iShares 0-3 Month Treasury Bond ETF. The Motley Fool has a disclosure policy.