Stock prices continue to soar as we head into 2026, with the S&P 500 and Dow Jones Industrial Average hitting new all-time highs earlier this week.
However, many investors are still on edge about what may be coming, with 80% of Americans at least somewhat concerned about a looming recession, according to a December 2025 survey from financial association MDRT.
It's wise to continue investing, even if a market downturn is on the horizon. Stocks could still have further to climb, and by continuing to buy consistently, you can capitalize on those returns. That said, investing in strong, stable exchange-traded funds (ETFs) can also help protect your portfolio if stocks tumble. And there are three powerful Vanguard funds that could be especially smart buys right now.
1. Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF (VOO 1.53%) is one of the largest and most popular ETFs out there. It tracks the S&P 500, containing just over 500 large-cap stocks from the nation's largest and strongest companies.
The S&P 500 itself has a decades-long track record of weathering even the most severe recessions, crashes, and bear markets. Not only has it survived these pullbacks, but it's gone on to earn positive total returns over time.
NYSEMKT: VOO
Key Data Points
If you're concerned about market volatility, an S&P 500 ETF can be a fantastic addition to your portfolio. With a long-term outlook, you're incredibly likely to see positive gains. In fact, over the last 82 years, every single one of the S&P 500's 10-year periods has ended in positive total returns, according to analysis from investment firm Capital Group.
While there are never any guarantees in the stock market, investing in an S&P 500 ETF and holding it for at least a decade can significantly limit the impact of volatility.
2. Vanguard Total Stock Market ETF
One potential downside of the Vanguard S&P 500 ETF is its growing tilt toward the tech industry. Tech stocks are growing at staggering rates, and because the S&P 500 only includes large companies, an increasing number of stocks within the index are from the tech sector.
That's not necessarily a bad thing, especially considering that large companies, in general, are more likely to pull through periods of market turbulence. But if you're looking to limit your exposure to tech giants, the Vanguard Total Stock Market ETF (VTI 1.60%) could be a smart alternative.
NYSEMKT: VTI
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This ETF aims to cover the entire U.S. equity market, with a whopping 3,527 stocks across all market segments. From small-cap to mega-cap and everything in between, this fund covers stocks of all sizes from all industries.
Increased diversification can further limit risk, especially when the market is shaky, and this ETF is about as diversified as you can get.
3. Vanguard Dividend Appreciation ETF
Dividend stocks pay a portion of their profits back to shareholders in the form of a dividend, and a dividend ETF is a collection of those stocks bundled together into a single investment.
The Vanguard Dividend Appreciation ETF (VIG 1.31%) focuses on companies with a history of increasing their dividend payouts year after year. For investors concerned about a market downturn taking a toll on their portfolios, a dividend ETF can help generate passive income in addition to any investment returns.
NYSEMKT: VIG
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This fund pays quarterly dividends, and its most recent payout was around $0.88 per share. That may not sound like much, but if you're investing consistently and accumulating shares over time, you can build a passive income source worth thousands of dollars per year.
Reinvesting those dividends can also help grow your passive income stream faster. The more you reinvest, the more shares you'll own, and the more you'll earn in dividends. Over time, that can create a snowball effect, exponentially increasing your dividend income.
No matter what lies ahead for the market, continuing to invest consistently can help build long-term wealth. By investing in quality ETFs with a track record of surviving volatility, you can rest easier knowing your portfolio is as protected as possible.
