All about Investing

1 ETF Im Stocking Up On If the Market Crashes

Related categories

Heres how Im preparing if a downturn is on the horizon.

If the stock market is known for anything, it's volatility. Over the past two years, the market has been shattering records. In recent weeks, though, stock prices have started to slide, with the market officially entering correction territory earlier this year.

While prices have rebounded somewhat, there's no telling what's in store for the market. Of course, that doesn't necessarily mean that a crash is looming. But if stock prices do fall, there's one investment I'm planning to stock up on: The Vanguard S&P 500 ETF (VOO -0.56%).

Image source: Getty Images.

How likely is a stock market crash?

It's almost guaranteed that the market will face another downturn eventually. After all, prices can't continue increasing forever. When that will happen, however, is the real question.

There are plenty of factors that could contribute to increased volatility within the market, from the war in Ukraine to surging inflation to supply chain issues. Whether those factors will trigger a crash, though, is anyone's guess.

In reality, nobody -- even the experts -- can predict exactly how the market will perform in the short term. But that doesn't mean you can't prepare for when a downturn inevitably hits.

How an S&P 500 ETF can protect your savings

An S&P 500 ETF, such as the Vanguard S&P 500 ETF, can be a fantastic investment to stock up on when the market is volatile. This type of fund tracks the S&P 500 index itself, aiming to mirror its performance.

Historically, the S&P 500 has earned positive average returns over time, despite experiencing countless corrections and crashes over the years. If the market crashes again, it's extremely likely an S&P 500 ETF will eventually recover. It could take months or even years, but with enough time, there's a very good chance it will rebound.

In addition, the S&P 500 only includes the largest and strongest stocks. Not only does this provide greater diversification (which can limit your risk), but it also means your investments are more likely to bounce back from downturns.

Healthy companies are the most likely to survive market turbulence. With an S&P 500 ETF, you're investing in hundreds of the strongest companies in the U.S.

Should you really be investing now?

It can be daunting to invest during periods of volatility, but downturns aren't as scary as they might seem. In fact, they can be some of the best opportunities to invest more.

When the market is in a slump, stock prices are lower. This gives you the chance to load up on quality investments at a discount, saving you money. Then when the market inevitably rebounds, you could see substantial gains.

Also, keep in mind that investing is a long-term game. If you invest now and stock prices drop, that can be discouraging. But historically, the market has earned positive average returns over decades. By staying in the market despite volatility, you can ride out the storm and maximize your long-term earnings.

Nobody knows for certain what the future holds for the market, but it's wise to start preparing anyway. For many investors, S&P 500 ETFs can be a fantastic option to protect your savings and survive volatility. By investing now, you'll reap the rewards down the road.

Leave your comment
Name
E-mail
Comment