Best ETFs to buy when the market is down

Both major indexes entered a bear market during the second quarter, and the iconic Dow Jones Industrial Average (^DJI) is about to enter bearish territory.

The uncertainty, volatility, and speed of bearish moves during bear markets can frighten retail investors and test their resolve to stay put. But history also shows it’s a great time to shop. Our editor, Élodie Sagon, spoke to experts in the field and discovered that every stock market correction and every bear market in history was eventually wiped out by a bull market.

However, buying individual stocks may not be fun in the short term, due to the increased volatility. This is where exchange-traded funds (ETFs) come in.

The Top ETF maintains a basket of securities that allows investors to target specific strategies, industries, sectors or indices. In exchange for paying an annual expense percentage, which covers costs such as money management fees, the ETF gives investors the diversification they want with the click of a button.

Top ETF, in case the market falls

Vanguard S&P 500 ETF

The first ETF to buy without hesitation when the market dips is the Vanguard S&P 500 ETF (VOO -0.54%). This ETF attempts to closely replicate the daily movements of the benchmark S&P 500 index.

Almost all fund managers aim to exceed the return of the S&P 500 index. However, simply matching the total return of the S&P 500 over an extended period of time can make an investor wealthy.

Each year, market analyst firm Crestmont Research releases data that examines the 20-year total returns, including dividends paid, for the S&P 500, and expresses total returns as an annual average. Data from Crestmont collected average annual returns for the subsequent 103 years and revealed that investors would have made profits in 103 of 103 20-year periods. In other words, when you buy importance is much less than how long you keep it. According to history, you are almost guaranteed to make money if you buy a standard S&P 500, such as the Vanguard S&P 500 Top ETF, and hold it for 20 years.

The SPDR S&P 500 Top ETF’s net expense ratio is 0.09%. This means that investors will lose 0.90 euros out of every 1,000 euros they invest in the “spy” as a fee. By comparison, the Vanguard S&P 500 ETF has a net expense ratio of just 0.03%, or €0.30 for every €1,000 invested. If you invest heavily in an index that tracks the S&P 500, it can save you a lot of expenses while delivering identical results.

Remember, too, that the S&P 500 adds and removes new companies each year. Companies that have underperformed for long periods may be fired and lose value in the market, while companies that outperform are added or remain in place. This provides the fuel that drives the S&P 500 Index, so the Vanguard S&P 500 ETF, is higher over time.

iShares Russell 2000 Growth ETF

The second premium chip ETF investors can buy right now with the market down is the iShares Russell 2000 Growth ETF (IWO -0.31%).

In many ways, the iShares Russell 2000 Growth Top ETF represents everything investors seem to be avoiding like the plague at the moment. This is an index of more than 1,100 stocks of small companies that are expected to grow at a faster rate than their peers for the foreseeable future. Almost everything related to “growth” and “small stocks” in 2022 has been hurt by concerns about rising interest rates and their impact on access to capital.

But there are plenty of reasons to be optimistic and the iShares Russell 2000 Growth ETF is a bullish game. For starters, growth stocks have historically outperformed yield stocks during periods of economic weakness. Although value stocks have an advantage in terms of very long-term average annual return, growing stocks have the upper hand when the economy falters.

Additionally, small-cap stocks tend to do better during the early stages of a bull market and the initial recovery of the economy. Although we’re not there yet, predicting when the stock market will end or when the economy will end is an exercise best left to hindsight. Since small-cap stocks took a hit in 2022, they are likely to rebound strongly in 2023 and/or 2024.

While small caps are generally riskier investments than large and mid-caps, distributing the fund’s money to 1,115 positions significantly reduces the risk of owning stakes in untested companies, but this could be a game changer.

Finally, the iShares Russell 2000 Growth ETF’s modest return of 0.46% is more than covering the net expense rate of 0.23%.

Vanguard Dividend ETF

The third and last best ETF to buy when the market is down is the Vanguard Dividend Appreciation ETF (VIG 0.14%).

As its name suggests, the Vanguard Dividend Appreciation ETF buys companies that have a history of increasing their payouts over time. Specifically, this ETF seeks to track the performance of the S&P US Dividend Growers Index.

One reason to buy a Vanguard Dividend Appreciation ETF with confidence is the history of stocks that pay dividends over long periods of time. In 2013, JP Morgan Asset Management released a report comparing the performance of companies that began paying dividends and increasing it to stocks that didn’t pay a dividend over a 40-year period (1972-2012). Dividend stocks have generated an average annual return of 9.5% over four decades, which has dominated non-dividend stocks (1.6% annual return).

Besides the historical outperformance of income stocks, companies that pay regular dividends to their shareholders are almost always profitable and have a proven track record. This means that investors do not have to worry about these companies when the inevitable recessions hit.

Diversification is another reason to believe that Vanguard Dividend Appreciation will make you richer over time. The fund owns 289 shares with an average market capitalization of $143.9 billion, as of August 31, 2022. Because periods of economic expansion last much longer than recessions and bear markets, the companies this fund holds are well positioned to benefit from U.S. expansion and the global economy.

Finally, you will not have to spend a lot of money for this diversification. The Vanguard Dividend Appreciation ETF has a net expense ratio of 0.06%. By comparison, the return is 1.93%, which is 41 basis points more than the return you would get from holding the SPDR S&P 500 ETF.

If you are a new investor. How to buy a Top ETF

Evaluate the amount you are willing to invest

It is better to imagine in advance a situation in which you will lose all this money. If you realize it’s not a disaster for your budget, you can try.

Keep in mind how much time you want to spend

If you are ready to take some training, dive into the topic and keep an eye on the stock market, you can try trading on your own.

– Choose strategy and assets

A strategy is a set of investment criteria that defines your investment style: the instruments you choose, the return you expect, the losses you are willing to take, the length of time you plan to invest and how often you want to trade.

Find an intermediary company

We fully understand and understand your dissatisfaction. The topic of Top ETF really requires a closer look, a special approach, and in-depth knowledge. But as in any business, everything comes with experience. Try, go deep and learn.

And to make learning less difficult, it is better to replace it with activities that make you feel good. Dancing to your favorite music, watching your favorite movie (remember the legendary lion from the Wolf of Wall Street?) or even playing poker, might be one of the most popular card games in the world. Moreover, the intuition developed in the game is also important in the stock market. Especially now you can find poker resources where your game will be unforgettable.


Index funds are serious business and therefore not easy to understand. You need to understand the risks, study hard and be able to adapt. But we decided to make it easy for you. If you want to know more about the best index ETFs to invest in, the best time to do it and how to invest in good conditions with reduced fees, then our article is for you.

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