Key insights
- The article suggests the Vanguard Utilities ETF (VPU) as a defensive play amid market concerns driven by geopolitical issues and inflation. It highlights the ETF's stability, diversification within the utilities sector, and a dividend yield exceeding the S&P 500 average. While promoting long-term stability, the recommendation indicates a cautious market sentiment, but the ETF's performance is not necessarily a strong leading indicator.
The S&P 500 is down more than 7% to start 2026, as investors worry about a prolonged downturn in the market this year due to geopolitical issues and the possibility that inflation spikes due to rising oil prices. Rather than loading up on the same growth stocks that have dominated headlines in recent years, investors find themselves pivoting to safer investments.
If you're looking for a way to reduce some of your risk in the stock market today, a good exchange-traded fund (ETF) to consider is the Vanguard Utilities ETF (VPU +0.63%). While it won't completely eliminate risk, here's why it can be a good option if you want a quality investment that you don't have to worry about.
When the markets are in turmoil as they are now, investors often look for a safe place to hide out amid uncertainty. The Vanguard Utilities Fund can be among the more popular options to consider, given both the stocks it invests in and the dividend it offers. At 2.5%, it pays more than double the S&P 500's average yield (1.2%).
The fund also has a position in 67 stocks, all of which are in the utilities sector. These types of stocks give you a position in businesses that generally have a great deal of stability and predictability in their future earnings. There's much less volatility with these types of investments than there is with other stocks. An example of that is the ETF's low beta value of 0.73, which is below 1.0, indicating that the fund doesn't follow the overall market too closely. This year, it has risen by 7%, while the S&P 500 has declined by a similar percentage.
Regardless of whether you're worried about a market crash or not, the Vanguard Utilities ETF can still make for a quality long-term investment to hang on to. Given its diversification into many types of utility stocks and the yield it offers, it can offer plenty of long-term stability. And the dividend income it generates can help your portfolio grow steadily in value over time, even if the ETF doesn't experience a significant surge in value.
The fund's expense ratio of 0.09% is also modest, which can make it a particularly suitable investment to buy and hold, since fees will remain fairly minimal in relation to your overall investment in the ETF, even over the very long haul. Overall, this Vanguard fund is a solid investment that you can buy and forget about.