What History Reveals About Buying the Vanguard S&P 500 ETF in Volatile Markets

S&P 500 (SNPINDEX: ^GSPC) performance and stock market volatility generally aren't good friends. When volatility picks up, it usually coincides with falling stock prices.

Thankfully, investors haven't had to deal with a lot of it in 2026. The Vanguard S&P 500 ETF (NYSEMKT: VOO) fell by around 9% during the early stages of the Iran war. But beyond that, pullbacks of even 4% have been uncommon.

That's not the norm, though. Corrections of 10% to 15% are pretty common and typically occur every one to two years. Even those kinds of pullbacks can feel painful and cause investors to alter their long-term investment plans. That tends to be the wrong thing to do. A lot of folks end up selling only after stocks have declined and fail to get back in the market until the recovery is already well underway.

Disciplined long-term investing suggests that investors need to ride out the volatility. If you choose to keep buying stocks throughout prolonged drawdowns, your personal rate of return might be even better.

Image source: Getty Images.

What S&P 500 market history actually shows

Going back to 1980, the S&P 500 has experienced an average intrayear decline of 14%. Reinforcing the buy-and-hold argument, however, the S&P 500 went on to finish the year in positive territory roughly 75% of the time. Market declines are normal. How you react to them makes a big difference.

Bear markets, on the other hand, can last longer and feel more painful. Since 1928, drops of 20% or more have lasted about 11 months on average and taken roughly two-and-a-half years to fully recover.

Overall, the length of time you're invested in the Vanguard S&P 500 ETF might do the best job of predicting your chances of success:

Source: Capital Group.

A one-year holding period gives you a good, not great, chance of being in the green regardless of what happens within that year. Historically, holding stocks for 10 years has made it very likely you'll come out ahead (and earn some pretty solid returns along the way).

Three rules for buying VOO in a decline

• Don't wait for conditions to "feel safe." Many of the S&P 500's strongest trading days occur during bear markets when volatility is high. Sitting in cash until after the recovery has begun or until investing feels right usually hampers long-term returns.
• Keep your time horizon in mind. If you'll need your money within a couple of years, the odds may not be good enough to take the chance that you'll avoid a bear market.
• Keep buying on schedule. Dollar-cost averaging through S&P 500 declines lowers your average cost basis and can improve your long-term returns.

The best results usually belong to those who are able to stick to their long-term plans and avoid the temptation to react to short-term conditions. Remember that history is often on your side in investing.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.