If you’re nervous about the stock market, you can’t go wrong with this investment.
The last few weeks have been rocky for the stock market, with the S&P 500 (^GSPC 0.97%) plummeting roughly 8.5% between mid-July and early August — inching dangerously close to correction territory.
While the market has largely recovered since then, many investors are still concerned that another sell-off could be around the corner. Considering how unpredictable the market can be in the short term, there’s always a possibility that a downturn is looming.
The right strategy, however, can help protect your savings. Although no investment is immune to volatility entirely, there’s one type of fund that’s all but guaranteed to survive slumps and earn positive returns over time: the S&P 500 ETF.
Image source: Getty Images.
What is an S&P 500 ETF?
An exchange-traded fund (ETF) is a collection of stocks grouped together into a single fund, and each ETF tracks a particular market index.
An S&P 500 ETF — such as the Vanguard S&P 500 ETF (VOO 0.96%), for example — tracks the S&P 500 and contains the same stocks as the index. Because it’s not possible to invest in the S&P 500 itself, investing in an ETF that mirrors the index’s performance is as close as you can get.
The S&P 500 itself contains stocks from 500 of the largest companies in the U.S., across a wide variety of industries. By investing in just one share of an S&P 500 ETF, you’ll instantly own a stake in all 500 of these companies. This makes it far easier (and more affordable) to build a diversified portfolio, which can reduce your risk.
Also, because the companies within the S&P 500 are some of the healthiest in the world, they’re far more likely to survive periods of market volatility.
For example, in the Vanguard S&P 500 ETF, the five largest holdings include Apple, Microsoft, Nvidia, Amazon, and Facebook. While these companies do often take significant hits during downturns, these types of stocks are likely to recover from even severe crashes and bear markets. Only the strongest companies are included in the S&P 500, so these stocks are among the best of the best.
Surviving market volatility
The S&P 500 ETF is not just a strong investment in theory. History shows that when it comes to earning positive long-term returns, it has an impeccable track record.
Analysts at Crestmont Research examined the S&P 500’s historical returns, looking specifically at how it performed during 20-year periods. They then determined how many of those periods ended in gains compared to losses.
The results? Every single 20-year period in the index’s history has ended in positive total returns. This means that if you’d invested in an S&P 500-tracking fund at any point in history and simply held it for 20 years, you’d have made money — even if the market was extremely volatile in that period.
Even in the last two decades alone, the S&P 500 has faced devastating downturns — from the dot-com crash in the early 2000s to the Great Recession to the COVID-19 crash and more. But since 2000, the index is still up by a whopping 278%.
^SPX data by YCharts
In other words, if you’d invested in an S&P 500 fund in 2000 and simply held it (without making any additional contributions), you’d have more than tripled your money by today.
Finally, one of the best perks of investing in an S&P 500 ETF is that it requires next to no effort. All of the stocks are already chosen for you, and because this investment performs best over the long term, you also don’t need to worry about deciding when to sell. Simply buy now and hold for as long as you can, and you’re almost guaranteed to see results — no matter what happens with the market.
If you’re feeling nervous about the market right now, that’s normal. But the right investment can help you build wealth while limiting risk. For those looking for a low-effort fund with a fantastic track record, the S&P 500 ETF is one of the best (and safest) options out there.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Katie Brockman has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
