Safest Index Funds and ETFs in 2024 | The Motley Fool (2024)

Index funds can be an excellent way to build an investment portfolio that isn’t too dependent on the success of any particular stock or bond. But not all index funds are in the “safe” category. In this article, we’ll dive into nine top index funds that should hold up well during turbulent times while still delivering strong long-term performance -- no matter what the economy does.

Safest Index Funds and ETFs in 2024 | The Motley Fool (1)

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9 Safest Index Funds and ETFs to buy in 2024

9 Safest Index Funds and ETFs to buy in 2024

There are plenty of index funds to invest in, but some are much safer than others. Some deliver fantastic long-term returns no matter what the economy, political climate, or stock market does in the short run. Others hold up better during recessions and other periods of uncertainty. By incorporating index funds like the nine exchange-traded funds (ETFs) listed here into your portfolio, you can implement a well-rounded investment strategy that can help you build wealth and sleep soundly at night.

Funds 1-5

Funds 1-5

1. Vanguard S&P 500 ETF (VOO 1.26%)

Legendary investor Warren Buffett has said that the best investment the average American can make is a low-cost S&P 500 index fund like the Vanguard S&P 500 ETF.

As its name implies, the ETF invests in all 500 companies that make up the and aims to track the performance of the index over time. It has a rock-bottom 0.03% expense ratio, which means your annual investment fees will be just $0.30 for every $1,000 in fund assets.

To be sure, the S&P 500 isn’t necessarily a “safe” investment over short periods of time. The index has historically fallen by 20% or more from recent highs every few years, and we’ve seen one such drop already in 2022. But, over time, you might be surprised how consistent the performance of the S&P 500 has been. Since 1965, the S&P 500 has delivered annualized total returns of 10.5%, building tremendous wealth over long periods.

2. Vanguard High Dividend Yield ETF (VYM 0.61%)

The Vanguard High Dividend Yield ETF tracks an index of stocks that have above-average dividend yields. The fund has a 0.06% expense ratio and invests in 443 different stocks, with top holdings including (JNJ 0.29%), ExxonMobil (XOM 0.39%), and JPMorgan Chase (JPM 1.44%). No individual stock makes up more than 3.1% of the fund’s assets. As you might expect, the ETF has an above-average 3.3% dividend yield.

As a group, dividend-paying stocks tend to hold up better than their non-dividend counterparts during tough times; that’s exactly what we’re seeing in the 2022 bear market. Through the first 10 months of the year, the Vanguard High Dividend Yield ETF is outperforming the S&P 500 by almost 10 percentage points.

This doesn’t come at the expense of long-term performance. The dividend-focused ETF tends to outperform during tough times and underperform during bull markets, but dividend stocks have historically delivered about the same total returns as the S&P 500 over time. In a nutshell, the ETF can be a great option for investors who want strong long-term performance but with less short-term volatility than the overall market.

3. Vanguard Real Estate ETF (VNQ 0.92%)

Real estate investment trusts, or REITs, can be a great addition to any risk-averse investment portfolio. REITs tend to pay higher dividends than the typical S&P 500 stock, have lower volatility during difficult environments, and have outperformed the S&P slightly over the long run.

The Vanguard Real Estate ETF tracks a weighted index of about 165 REITs, with top holdings that include American Tower (AMT 1.09%), Prologis (PLD 0.72%), Crown Castle (CCI 0.41%), Equinix (EQIX 0.95%), and Public Storage (PSA 0.3%). Because REITs are designed to pass through most of their income to shareholders, the fund pays a dividend yield of about 4% as of April 2024. Its 0.12% expense ratio is on the lower end of the ETF spectrum, so you’ll keep most of the returns the underlying stocks generate.

4. iShares Core S&P Total U.S. Stock Market ETF (ITOT 1.18%)

Instead of choosing individual stocks or even a particular benchmark index, one way to reduce your risk is to simply invest in the entire stock market. You can do this by investing in an index fund that tracks a “total market” index, such as the iShares Core S&P Total U.S. Stock Market ETF. To be sure, the overall market can be quite volatile in the short term but has historically produced excellent long-term returns.

As the name suggests, the ETF essentially aims to match the performance of the overall U.S. stock market. It owns almost 3,400 different stocks, ranging from mega-cap giants to small-cap companies. Its 0.03% expense ratio is among the lowest in the entire ETF industry.

5. Consumer Staples Select Sector SPDR Fund (XLP 0.28%)

If you’re concerned about safety during a recession or other tough environments, it can be a good idea to invest in companies that sell things that people need. The consumer staples sector is full of companies that do just that, and a great index fund to invest in is the Consumer Staples Select Sector SPDR ETF.

The ETF has a 0.10% expense ratio, which is certainly on the lower end of the spectrum when it comes to sector-specific index funds. It invests in the consumer staples companies in the S&P 500 index, with larger holdings in companies such as (PG 0.6%), PepsiCo (PEP -2.97%), Coca-Cola (KO 0.15%), Costco (COST 1.01%), and Walmart (WMT -1.75%). In a nutshell, these businesses tend to do almost as well in tough economic times as they do in strong economies.

Funds 6-9

Funds 6-9

6. iShares 0-3 Month Treasury Bond ETF (SGOV 0.01%)

When it comes to safe investments, the iShares 0-3 Month Treasury Bond ETF is the next safest thing to simply holding cash in your portfolio. The index fund invests in a portfolio of Treasury securities with maturity dates of three months or less.

As you might imagine, this is more of a cash alternative than a way to generate wealth over the long run. Treasury securities are perfectly safe, and the short maturity nature of the fund means that your investment won’t fluctuate as much with interest rate changes as comparable ETFs of longer-maturity bonds. The fund currently has a yield of about 4.7% due to the current rising-rate environment, but this will change regularly as interest rates move higher or lower. Its 0.05% expense ratio makes the ETF a far more appealing way to put your cash to work in a risk-free manner than actually buying bonds.

7. Vanguard Utilities ETF (VPU 0.47%)

There are few types of businesses as recession-resistant as utilities. Consumers and businesses need to pay their electric and gas bills no matter what the economy is doing, and these businesses generally have monopolies (or close to it) in the areas where they operate. So an index fund like the Vanguard Utilities ETF that tracks the utility sector could be worth a look if safety is what you’re after.

This particular index fund has a 0.10% expense ratio, which is cheap for a sector-tracking ETF, and it owns a basket of 65 utilities stocks with a median market cap of almost $35 billion. Top holdings include NextEra Energy (NEE 1.36%), Duke Energy (DUK 0.08%), Southern Co. (SO 0.37%), and Dominion Energy (D 0.08%), and it’s rather likely that if you own or rent a home in the United States, you make regular utility payments to a company included in the index.

It’s also worth noting that since utilities companies don’t need a ton of capital to invest in things like research and development, they tend to pay higher dividends. As of April 2024, the Vanguard Utilities ETF had a dividend yield of about 3.45%, making it a good choice for income as well as safety.

8. iShares U.S. Healthcare Providers ETF (IHF 0.5%)

Another sector that is typically considered to be recession-resistant is healthcare, but it’s important to realize that the healthcare sector is a broad one that contains several types of stocks that aren’t necessarily safe, such as pharmaceuticals and biotechnology companies.

For this reason, investors looking for safety may want to take a more targeted approach, such as the iShares U.S. Healthcare Providers ETF. Instead of focusing on the entire healthcare sector, the index fund tracks a group of stocks that provide healthcare, diagnostics, and health insurance -- the things people need regardless of the economic environment.

The fund has a 0.39% expense ratio, which is the highest on this list by a significant margin, but it is in line with many other specialized ETFs. (As a general rule, the narrower an index fund’s focus, the higher the fees.) Top holdings of the ETF include UnitedHealth (UNH -1.03%) and CVS Health (CVS -1.62%), and the index fund holds 70 healthcare provider stocks altogether.

9. Schwab U.S. TIPS ETF (SCHP 0.21%)

Inflation spiked to its highest level in more than 40 years in 2022, and this is one of the big reasons why many stock-based investments have performed so poorly. But keeping money in cash isn’t a great alternative since inflation can dramatically erode the purchasing power of money over time.

In the interest of safely combating inflation, one ETF worth a look is the Schwab U.S. TIPS ETF, which invests in an index linked to inflation-protected Treasury securities. Not surprisingly, the current yield on the fund is fantastic since it’s linked to inflation. As of April 2024, the trailing 12-month yield of the ETF is around 3%. As inflation has cooled off since 2022, the index fund has a lower yield; if it doesn’t, the purchasing power of your money is safe. A 0.03% expense ratio can be a small price to pay for the peace of mind inflation resistance can provide.

Why are they safe?

Why are index funds considered a safe investment?

Index funds are generally considered safe because they don’t rely too much on the performance of any individual stock, and they also don’t rely on the competence of investment managers as actively managed mutual funds or hedge funds do. This can add an element of safety to a volatile investment. For example, if you’re a fan of the biotech industry, choosing a biotech index fund to bet on the entire industry, instead of putting your faith in a single company, could be a smart way to go.

Related investing topics

How to Invest in Index Funds in 2024Index funds track a particular index and can be a good way to invest. Get a fast introduction to index funds here.
7 Best ETFs to Buy in April 2024ETFs can help eliminate risk because they tend to be less volatile than individual stocks.
Industries That Thrive During RecessionsSome industries do well when the economy goes south. Here's how to recession-proof your portfolio.
Top Oil ETFs of 2024Take a look at some of this year's top-performing oil ETFs and consider whether they deserve a spot in your portfolio.

The bottom line

Index funds can be a smart way to build a diverse stock portfolio tailored to your investment goals whether your priorities are income, growth, stability, or a combination of the three. And while this isn’t intended to be an exhaustive list of the index funds that could add an element of safety to your investment strategy, these are nine examples of excellent index fund ETFs that could be a great start.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Matt Frankel has positions in Public Storage, Vanguard S&P 500 ETF, and Vanguard Specialized Funds - Vanguard Real Estate ETF. The Motley Fool has positions in and recommends American Tower, Costco Wholesale, Crown Castle, Equinix, JPMorgan Chase, NextEra Energy, Prologis, Schwab Strategic Trust - Schwab U.s. Tips ETF, Vanguard S&P 500 ETF, Vanguard Specialized Funds - Vanguard Real Estate ETF, Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF, and Walmart. The Motley Fool recommends CVS Health, Dominion Energy, Duke Energy, Johnson & Johnson, and UnitedHealth Group and recommends the following options: long January 2026 $180 calls on American Tower, long January 2026 $90 calls on Prologis, and short January 2026 $185 calls on American Tower. The Motley Fool has a disclosure policy.

Safest Index Funds and ETFs in 2024 | The Motley Fool (2024)

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Safest Index Funds and ETFs in 2024 | The Motley Fool? ›

The Motley Fool has positions in and recommends Vanguard Bond Index Funds-Vanguard Total Bond Market ETF, Vanguard Index Funds-Vanguard Growth ETF, Vanguard Index Funds-Vanguard Total Stock Market ETF, Vanguard S&P 500 ETF, Vanguard Star Funds-Vanguard Total International Stock ETF, and Vanguard Tax-Managed Funds- ...

What does the Motley Fool pick for 2024? ›

The top 10 stocks to buy in April 2024
  • CrowdStrike (CRWD -3.9%), $68 billion.
  • PayPal (PYPL 0.34%), $66 billion.
  • MercadoLibre (MELI -1.01%), $84 billion.
  • Airbnb (ABNB -3.18%), $88 billion.
  • Shopify (SHOP 0.23%), $105 billion.
  • Intuitive Surgical (ISRG -1.69%), $128 billion.
  • Walt Disney (DIS 0.16%), $165 billion.

What are the best ETFs for 2024? ›

Top 7 ETFs to buy now
ETFTickerAssets Under Management (AUM)
Vanguard S&P 500 ETF(NYSEMKT:VOO)$435.2 billion
Invesco QQQ Trust(NASDAQ:QQQ)$259.6 billion
Vanguard Growth ETF(NYSEMKT:VUG)$118.8 billion
iShares Core S&P Small-Cap ETF(NYSEMKT:IJR)$79.8 billion
3 more rows
Apr 1, 2024

Which fund to invest in 2024? ›

Best 10 Performing Funds in Q1 2024
FundMedalist RatingQ1 Return
GQG Partners US EquitySilver23.59
GQG Partners Global EquityGold19.93
Neuberger Berman 5G CnnctvtyBronze19.65
IFSL Meon Adaptive GrowthNeutral19.30
6 more rows
Apr 4, 2024

Does Motley Fool recommend ETFs? ›

The Motley Fool has positions in and recommends Charles Schwab, Vanguard Bond Index Funds - Vanguard Total Bond Market ETF, Vanguard Index Funds - Vanguard Small-Cap ETF, Vanguard S&P 500 ETF, Vanguard Specialized Funds - Vanguard Real Estate ETF, and Vanguard Star Funds - Vanguard Total International Stock ETF.

What stocks are expected to explode in 2024? ›

2024's 10 Best-Performing Stocks
Stock2024 return through March 31
Arcutis Biotherapeutics Inc. (ARQT)206.8%
Janux Therapeutics Inc. (JANX)250.9%
Trump Media & Technology Group Corp. (DJT)254.1%
Super Micro Computer Inc. (SMCI)255.3%
6 more rows
Apr 1, 2024

What stock will make me rich in 2024? ›

For this purpose, we created a list of stocks that could make you rich in 2024, and some of them include Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL), and Advanced Micro Devices, Inc. (NASDAQ:AMD). A financial analyst looking through a microscope at stocks to determine their market value.

What are the best ETFs for April 2024? ›

The 10 Best ETFs of April 2024
Fund NameExpense Ratio
Vanguard Total International Stock ETF (VXUS)0.07%
Schwab U.S. Dividend Equity ETF (SCHD)0.06%
Invesco S&P 500 GARP ETF (SPGP)0.34%
Schwab Fundamental International Large Company Index ETF (FNDF)0.25%
6 more rows
Apr 8, 2024

What is the safest ETF to invest in? ›

Broad-market funds are one of the safest types of ETF. With the right strategy, you could potentially earn hundreds of thousands of dollars or more.

Which ETF has the best 10 year return? ›

Top 10 ETFs by 10-year Performance
TickerFund10-Yr Return
SMHVanEck Semiconductor ETF24.37%
SOXXiShares Semiconductor ETF23.62%
PSIInvesco Dynamic Semiconductors ETF23.59%
XSDSPDR S&P Semiconductor ETF21.88%
6 more rows

What is the safest investment with the highest return? ›

Here are the best low-risk investments in April 2024:
  • High-yield savings accounts.
  • Money market funds.
  • Short-term certificates of deposit.
  • Series I savings bonds.
  • Treasury bills, notes, bonds and TIPS.
  • Corporate bonds.
  • Dividend-paying stocks.
  • Preferred stocks.
Apr 1, 2024

What is the best investment for next 20 years? ›

The 10 best long-term investments
  • Bond funds.
  • Dividend stocks.
  • Value stocks.
  • Target-date funds.
  • Real estate.
  • Small-cap stocks.
  • Robo-advisor portfolio.
  • Roth IRA.

Is this a good time to buy index funds? ›

Any time is good for investing in index funds when you plan to hold the fund for the long term. The market tends to rise over time, but not without some downturns along the way, thanks to short-term volatility.

Should I wait to invest in ETFs? ›

Should you invest in ETFs? Since ETFs offer built-in diversification and don't require large amounts of capital in order to invest in a range of stocks, they are a good way to get started. You can trade them like stocks while also enjoying a diversified portfolio.

Should I put most of my money in ETFs? ›

You expose your portfolio to much higher risk with sector ETFs, so you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don't use these at all.

Should I keep my money in ETFs? ›

ETFs can be a great investment for long-term investors and those with shorter-term time horizons. They can be especially valuable to beginning investors. That's because they won't require the time, effort, and experience needed to research individual stocks.

What is The Motley Fool's top 10 stocks 2024? ›

The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, Uber Technologies, and Zoom Video Communications.

What is The Motley Fool's top 10 stock picks? ›

See the 10 stocks

Parkev Tatevosian, CFA has positions in Alphabet and PayPal. The Motley Fool has positions in and recommends Alphabet, Amazon, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, Uber Technologies, and Zoom Video Communications.

What are the best 3 stocks for 2024? ›

Best S&P 500 stocks as of April 2024
Company and ticker symbolPerformance in 2024
NVIDIA (NVDA)82.5%
Constellation Energy (CEG)58.1%
Deckers Outdoor (DECK)40.8%
Micron (MU)38.1%
7 more rows

What is Motley Fool's all in buy stock? ›

We regularly see similar ads from the Motley Fool about “all in” buy alerts, sometimes also called “double down” or “five star” buys, and they're generally just the type of steady teaser pitch that they can send out all year, over and over with no updates, to recruit subscribers for their flagship Motley Fool Stock ...

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