Stock market volatility poses challenges during bear markets, making it difficult to find reliable investment options. Rather than focusing on individual stocks that may perform well in downturns, many investors find it more effective to invest in low-cost index funds that track the total stock market and maintain those investments during short-term declines.
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Among the recommended funds are the Vanguard S&P 500 ETF (NYSEMKT: VOO), the Vanguard Morningstar Total Stock Market ETF (NYSEMKT: VTI), and the Schwab U.S. Broad Market ETF (NYSEMKT: SCHB). Each of these ETFs charges an expense ratio of only 0.03%, allowing investors to access hundreds or even thousands of U.S. stocks for a low fee.
The S&P 500 has historically yielded an average annual return of about 10% since 1928. The Vanguard S&P 500 ETF (VOO), which has been available since September 2010, aims to mirror this performance. VOO has achieved an average annual return of approximately 14.9% over its 16-year history.
For broader exposure, the Schwab U.S. Broad Market ETF (SCHB) includes 2,394 large-cap stocks from the largest publicly traded U.S. companies. Since its launch in November 2009, SCHB has delivered average annual returns of about 14.3%.
For even greater diversification, the Vanguard Morningstar Total Stock Market ETF (VTI) encompasses 3,519 stocks, covering the entire U.S. stock market spectrum and including mid-cap and small-cap companies likely to become significant players in the future.