Investors Seek Stability Amid Market Turbulence with ETFs

As the U.S. Stock market enters March 2025, the sentiment has notably shifted from hopes of a soft landing towards concerns about an impending economic impact. The emergence of tariff threats and ongoing trade disputes have dampened investor confidence while ambiguous economic indicators raise fears of a potential recession.

Compounding this unease, growth stocks that once soared—especially the Magnificent Seven technology giants—are now reeling from apprehensions about high capital expenditures related to AI and signs of overvaluation. The fluctuations in the Dow and the Nasdaq are more than just a temporary setback; they signal a wake-up call for many investors.

For those chasing the next big trend—be it AI advancements or space exploration stocks—the thrill can be enticing. However, for conservative investors seeking peace of mind without the constant worry over market news, this strategy falls short. In this context, high-quality ETFs offering income streams provide a steady, low-drama avenue for securing long-term growth while benefitting from reliable dividends, all without the anxiety of short-term market volatility.

Warren Buffett, an ardent supporter of S&P 500 index funds, advised that “For most people, the best thing to do is own the S&P 500 index fund.” In the face of today’s market uncertainties, such wisdom resonates more than ever.

This article examines three notable ETFs that appeal to cautious investors. They blend extensive market exposure with dependable income, designed for long-term stability, especially amidst the current stock market fluctuations.

SCHD: A Leading Dividend ETF from Charles Schwab

The Schwab US Dividend Equity ETF (NYSEARCA: SCHD) stands out as one of Charles Schwab’s premier offerings. This ETF targets quality U.S. companies known for their consistent dividend distributions.

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SCHD tracks the Dow Jones U.S. Dividend 100 Index, which includes 100 U.S. companies notable for high dividend yields.

What distinguishes SCHD is its strict selection criteria, focusing on companies committed to rewarding shareholders with sustained and increasing dividends. To qualify, a company must demonstrate at least a decade of uninterrupted dividend payments, effectively filtering out those with erratic dividend histories or susceptibility to economic downturns.

The ETF holds a well-diversified portfolio, with its top three sectors comprising healthcare (17%), consumer staples (15%), and financials (14%). It currently showcases an impressive 9.17% dividend yield, with an annual distribution of $2.56 per share, making it a compelling selection for income-oriented investors seeking reliable returns.

VYM: A Targeted Investment in High-Dividend U.S. Stocks

The Vanguard High Dividend Yield ETF (NYSEARCA: VYM) provides a strategic pathway for investors looking to tap into high-performing dividend-paying U.S. companies.

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This ETF mirrors the FTSE High Dividend Yield Index, which identifies companies with substantial dividends while excluding REITs, and it sizes its holdings according to market capitalization.

With $60 billion in assets under management (AUM), VYM is approximately $10 billion smaller than SCHD. This ETF features a low net expense ratio of 0.06% alongside a solid dividend yield of 2.5%.

Despite broader market challenges—including the S&P 500’s year-to-date dip—VYM’s defensive nature has enabled it to maintain resilience, with a modest gain of nearly 2% this year.

Top holdings include Broadcom, JPMorgan, and Exxon Mobil, making up nearly 12% of the fund’s total weight. Analysts monitoring over 61% of VYM’s portfolio have assigned an overall rating of Moderate Buy, solidifying its status as a stable choice for dividend investors.

SPHD: A Balanced Strategy with High Dividends and Low Volatility

The Invesco S&P 500 High Dividend Low Volatility ETF (NYSEARCA: SPHD) focuses on large-cap companies, tracking a dividend-yield-weighted index that includes the least volatile, highest dividend-yielding stocks in the S&P 500.

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This ETF adeptly combines steady income generation with minimized market risk, presenting investors with a balanced approach to dividend investing.

SPHD delivers a noteworthy 3.45% dividend yield and has proven to be defensive, having declined only 4.37% from its 52-week high, outperforming the broader S&P 500, which has fallen nearly 6% from its peak.

Its top holdings feature Altria Group, Verizon Communications, Pfizer, and Realty Income, underscoring the ETF’s low-volatility investment strategy. SPHD carries a net expense ratio of 0.3% and manages $3.47 billion in AUM.

In terms of liquidity, SPHD averages around 500,000 shares in daily trading volume, which is notably lower than SCHD and VYM, both exceeding one million shares traded daily.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.