The S&P 500 (^GSPC +0.41%) may have set records early in 2026, but nearly one-third of investors feel pessimistic about the market's next six months, according to the most recent weekly survey from the American Association of Individual Investors.
Some of this pessimism may stem from fears of a potential artificial intelligence (AI) bubble. To be clear, there are no guarantees that an AI-related bear market or recession is coming.
It is likely, though, that the market will experience a pullback eventually, regardless of what's happening in the AI industry. Stock prices can't keep rising forever, and it's wise to take steps now to ensure your portfolio is prepared to weather a downturn. And there's one ETF that could be an especially smart buy right now.
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How to limit risk while still building long-term wealth
Investing in ETFs can go a long way toward limiting risk, as each fund contains a variety of stocks bundled together into a single investment. If you're worried about future market volatility, one of the safer options is a broad market fund, such as the Vanguard Total Stock Market ETF (VTI +0.36%).
NYSEMKT: VTI
Key Data Points
This ETF holds more than 3,500 stocks from all corners of the market. While it does contain big players in the AI industry (more than one-third of the fund is devoted to the tech sector), it also holds thousands of other companies of all sizes, across all industries.
That level of diversification can help protect your portfolio. If we face an AI bubble burst and tech stocks are hit hard, this ETF has plenty of other strong stocks to help it weather the storm.
Since the Vanguard Total Stock Market ETF was launched in 2001, it's earned total returns of nearly 500% -- despite experiencing everything from the tail end of the dot-com bubble burst to the Great Recession to the COVID-19 crash to the bear market throughout 2022.
How to prepare for a potential market downturn
Before you invest anywhere, be sure you're willing and able to stay in the market for at least five years or so. Staying invested for decades is even better. If stock prices plunge and you have to pull your money out for any reason, you risk selling your investment for far less than you paid for it -- potentially locking in steep losses.
Keep in mind too that safer investments often come with lower earning potential. That's not necessarily a bad thing, as there will always be a trade-off in risk and reward when investing. Total stock market ETFs often carry less risk than individual stocks or industry-specific funds, but that level of diversification can also dilute the fund's overall earnings.
The Vanguard Total Stock Market ETF won't be the right fit for every portfolio, but it can be a smart foundation fund to help protect against risk -- especially during periods of market volatility.
