No one knows when or why the next stock market sell-off will occur. But we do know that market downturns are part of the price of admission for unlocking the long-term gains of the stock market.
A correction, which is defined as a drop of at least 10% from a high, happens about every 1.85 years. A bear market, which is a drawdown of at least 20%, happens about every 3.6 years. This means that about half of all corrections evolve into bear markets, so investors with at least a three- to five-year time horizon should be prepared for a bear market.
By investing in companies with strong business models and reasonable valuations, you can position your portfolio to outlast a bear market. Exchange-traded funds (ETFs) invest in dozens, if not hundreds, of companies at once — further reducing volatility.
Here’s why the Vanguard S&P 500 Value ETF (NYSEMKT: VOOV), the Vanguard Russell 2000 Value ETF (NASDAQ: VTWV), and the Vanguard Consumer Staples ETF (NYSEMKT: VDC) are all worth buying in 2025, even if there’s a stock market sell-off.
The fund targets value-focused companies like Berkshire Hathaway, JPMorgan Chase, ExxonMobil, Walmart, and more. Many top holdings in the fund are known for returning value to shareholders through dividends or buybacks. For example, Berkshire Hathaway famously doesn’t pay a dividend but regularly repurchases its stock to reduce the share count and grow earnings per share.
By not investing in high-flying growth stocks, the Vanguard S&P 500 Value ETF achieves a lower valuation and a higher yield than the S&P 500. The ETF has a price-to-earnings ratio (P/E) of 20.3 and a dividend yield of 1.9%, compared to a 27.6 P/E and 1.2% yield for the Vanguard S&P 500 ETF, which tracks the performance of the index.
Compared to the S&P 500, the Vanguard S&P 500 Value ETF is more concentrated in lower growth, lower valuation sectors like utilities, healthcare, and financials.
|
Sector Weighting |
Vanguard S&P 500 Value ETF |
Vanguard S&P 500 ETF |
|---|---|---|
|
Financials |
25.1% |
13.9% |
|
Health Care |
16.5% |
10.6% |
|
Industrials |
11.7% |
8.6% |
|
Consumer Staples |
10% |
5.7% |
|
Technology |
7.7% |
31.3% |
|
Energy |
6.2% |
3.5% |
|
Utilities |
5.3% |
2.5% |
|
Consumer Discretionary |
5.2% |
10.7% |
|
Communication Services |
4.6% |
8.9% |
|
Real Estate |
4.3% |
2.2% |
|
Materials |
3.4% |
2.1% |
Data source: Vanguard.
By not holding top tech stocks like Apple, Microsoft, or Nvidia, consumer discretionary leaders like Amazon or Tesla, or communications giants like Alphabet and Meta Platforms, the Vanguard S&P 500 Value ETF is considerably underweight technology, consumer discretionary, and communications, relative to the S&P 500.
