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Seeking Shelter: Vanguard’s Defensive Funds in a Potentially Unstable Market Seeking Shelter: Vanguard’s Defensive Funds in a Potentially Unstable Market

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The S&P 500 is currently trading near a historic high, and caution is warranted. Threats such as record credit card debt, controlled economic growth, and the U.S. presidential election’s ambiguous effect on the stock market highlight the need for protection. Defensive stocks and funds, shielding against economic upheaval, are the go-to in uncertain times. These are companies creating indispensable products or services, often paying regular dividends, providing a cushion against market-wide decline.

A piggybank next to wooden blocks that spell ETF.

Image source: Getty Images.

Looking at Vanguard’s offerings, here are two exchange-traded funds (ETFs) that serve as bulwarks for investors — low-cost, diversified, and boasting a consistent track record.

Consider These Vanguard Fortresses

1. Vanguard Health Care Index Fund

The Vanguard Health Index Fund (NYSEMKT: VHT) tracks the MSCI US IMI Health Care 25/50 index, encompassing the entire U.S. healthcare sector. Perfectly 419 stocks strong, with the top 10 accounting for over 48% of the pie. Operating at an impressive 0.10% expense ratio, an incredibly low 4.1% turnover rate, and a decent dividend yield at 1.3%, this fund remains a stronghold in any portfolio.

The healthcare sector’s resilience and innovation, driven by the aging U.S. population, rising health demands, and technological advancements, makes it a defensive force. Historically delivering 181% total returns over the past decade, albeit trailing the S&P 500 by 44 percentage points, the fund has held its own. Yet, in a bear market scenario, the Vanguard Health Index Fund has proven its mettle, outperforming the benchmark index by a noteworthy 12.5 percentage points during the 2022 bear market.

2. Vanguard High Dividend Yield Index Fund

The Vanguard High Dividend Yield Index Fund (NYSEMKT: VYM) tracking the FTSE High Dividend Yield index, comprises companies with robust dividend payouts. With 450 stocks in its arsenal and the top 10 holdings making up 24.6% of its weight, this fund boasts an ultra-low 0.06% expense ratio, accompanied by a rock-bottom 5.7% turnover rate and a generous 3.09% dividend yield. 

Income-seeking investors eyeing steady cash flow find solace here. The fund has delivered total returns of 153% over the last decade, triumphing over the broader market by a significant 17.6 percentage points during the 2022 bear market, underlining the colossal hedging power of regular dividend payments.

Is Vanguard World Fund – Vanguard Health Care ETF a wise investment?

The Motley Fool Stock Advisor analyst team may not advocate for Vanguard Health Care ETF, but their track record speaks volumes. Making a case for its service, including guidance on portfolio building, regular analyst updates, and two monthly stock picks, the flourishing Stock Advisor service has eclipsed the return of S&P 500 since 2002 by more than three times.*

Check out the 10 stocks

*Stock Advisor returns as of February 20, 2024

George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

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

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