Stock prices continue to rise as we head into 2026, with S&P 500 and Dow Jones Industrial Average hitting new all-time highs earlier this week.
However, many investors are still uneasy about what might happen, with 80 percent of Americans at least somewhat concerned about a looming recession, according to a December 2025 survey by financial association MDRT.
It is wise to continue investing even if a market downturn is on the horizon. Stocks may still have more to go, 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 fall. And there are three strong Vanguard funds that could be particularly smart buys right now.
The Vanguard S&P 500 ETF (NYSEMKT: FLIGHT) is one of the largest and most popular ETFs out there. It tracks the S&P 500, which contains just over 500 large-cap stocks from the nation’s biggest and strongest companies.
The S&P 500 itself has a decades-long track record of withstanding even the most severe recessions, crashes and bear markets. Not only has it survived these pullbacks, it has continued to make positive total returns over time.
If you’re worried about market volatility, an S&P 500 ETF can be a fantastic addition to your portfolio. With a long-term perspective, you are incredibly likely to see positive gains. In fact, over the past 82 years, each of the S&P 500’s 10 years has ended with positive total returns, according to analysis by 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.
A potential downside of the Vanguard S&P 500 ETF is its increasing tilt toward the technology industry. Technology stocks are growing at amazing rates, and since the S&P 500 only includes large companies, an increasing number of stocks in the index are from the technology sector.
That’s not necessarily a bad thing, especially considering that large companies are generally more likely to go through periods of market turbulence. But if you want to limit your exposure to tech giants, Vanguard Total Stock Market ETF (NYSEMKT:VTI) could be a smart alternative.
This ETF aims to cover the entire US equity market with 3,527 stocks across all market segments. From small-caps to mega-caps and everything in between, this fund covers stocks of all sizes across all industries.
Increased diversification can further limit risk, especially when the market is volatile, and this ETF is as diversified as you can get.
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 into one investment.
The ETF Vanguard Dividend Appreciation (NYSEMKT: VIG) focuses on companies with a history of increasing dividend payments year over year. For investors concerned about a market downturn affecting their portfolios, a dividend ETF can help generate passive income on top of any investment returns.
This fund pays dividends quarterly, and the most recent payment was approximately $0.88 per share. It may not sound like much, but if you invest consistently and accumulate shares over time, you can build a passive income stream worth thousands of dollars a year.
Reinvesting these dividends can also help you grow your passive income stream faster. The more you reinvest, the more shares you will own and the more dividends you will earn. Over time, this can create a snowball effect, increasing dividend income exponentially.
Regardless of what’s next 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 easy knowing your portfolio is as protected as possible.
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Katie Brockman has positions in the Vanguard S&P 500 ETF and the Vanguard Total Stock Market ETF. The Motley Fool has positions in and recommends the Vanguard Dividend Appreciation ETF, the Vanguard S&P 500 ETF, and the Vanguard Total Stock Market ETF. The Motley Fool has a disclosure policy.
3 Magnificent Vanguard ETFs to Stock Up on Right Now If a Recession Comes in 2026 was originally published by The Motley Fool
