When stock market turbulence strikes unexpectedly, the impact on your investments can be sudden and unwelcome. Persistent elevated inflation, coupled with economic uncertainties, keeps investors on edge. To navigate these choppy waters, here’s a curated list of some of the most resilient defensive ETFs worth adding to your financial arsenal.
Leading Defensive ETFs to Fortify Your Portfolio
One effective method for safeguarding your holdings is exploring these well-regarded, budget-friendly funds known for their conservative approach. Below, we’ve highlighted standout ETFs based on data current as of March 12, 2025, that blend stability with growth potential.
iShares Edge MSCI Min Vol USA ETF (USMV)
With assets surpassing $23 billion, this widely favored ETF offers a pathway to remain invested in equities while dialing down exposure to volatility. The strategy filters large- and mid-cap stocks through a proprietary ranking system, emphasizing those with minimal price swings and projected subdued volatility, ultimately shaping the fund’s portfolio.
The fund tracks the MSCI USA Minimum Volatility Index, aiming to assemble a collection of shares that exhibit the least erratic price behavior within the broad U.S. market.
- Annualized 5-year return: 11%
- Dividend yield: 1.46%
- Expense ratio: 0.15%
Fidelity MSCI Utilities ETF (FUTY)
Industries such as utilities and water services often maintain their footing amid economic slowdowns, thanks to their persistent demand regardless of market fluctuations. These sectors have earned their reputation as reliable havens during bearish phases.
Among the fund’s top stakes, NextEra Energy (NEE) and Duke Energy (DUK) stand out, powering millions of households along the Southeast American coastline.
- Annualized 5-year return: 8.2%
- Dividend yield: 2.92%
- Expense ratio: 0.084%
Invesco S&P 500 High Div Low Vol ETF (SPHD)
Delivering one of the heftiest yields on this roster, Invesco’s high dividend, low volatility fund offers income generation with tempered risk. Its portfolio mainly resides in defensive realms like utilities, healthcare, and consumer staples.
These sectors typically foster sustainable dividend growth even amid market downturns. Utilities and healthcare are essential regardless of economic cycles, while consumer staples cover everyday necessities such as food and personal care. Flagship holdings include Altria Group (MO) and Verizon (VZ), anchoring the fund’s defensive posture.
- Annualized 5-year return: 12.4%
- Dividend yield: 4.47%
- Expense ratio: 0.30%
Vanguard Consumer Staples ETF (VDC)
Echoing Fidelity’s focus on steady sectors, this Vanguard ETF prioritizes consumer goods companies known for their resilience during market gyrations. Unlike utilities-focused funds, VDC zeroes in on everyday household essentials.
Leading positions include retail giants Costco Wholesale (COST) and Walmart (WMT), alongside consumer goods titan Procter & Gamble (PG).
- Annualized 5-year return: 11.2%
- Dividend yield: 2.08%
- Expense ratio: 0.09%
Utilities Select Sector SPDR ETF (XLU)
Boasting assets north of $17 billion, this ETF is the heavyweight champ among utilities trackers. Managed by State Street Global Advisors, it closely mirrors Fidelity’s approach, targeting energy providers that fuel millions of American homes with gas and electricity.
During market slowdowns, these shares often serve as anchors of stability, offering relatively predictable cash flows.
- Annualized 5-year return: 8.3%
- Dividend yield: 2.93%
- Expense ratio: 0.08%
iShares 1-3 Year Treasury Bond ETF (SHY)
This bond-focused ETF balances respectable income with stability by holding short-term U.S. Treasury securities. The brevity of maturities acts as a buffer, reducing vulnerability to rising interest rates that could otherwise erode fund value.
As a hedge against equity market drops, SHY fits neatly within diversified portfolios bracing for volatility.
- Annualized 5-year return: 1.1%
- Dividend yield: 4.03%
- Expense ratio: 0.15%
Key Market Stats to Keep in Mind
As of early 2025, U.S. inflation remains elevated at approximately 4.5%, contributing to market jitters and prompting investors to seek defensive sectors. Historically, utilities and consumer staples have outperformed during recessionary periods by 3-5% compared to the broader market, underscoring their role as portfolio stabilizers.
Final Thoughts
Rather than reflexively liquidating assets amid downturns, discerning investors explore alternative avenues to preserve wealth. Defensive ETFs offer a strategic way to maintain market exposure while cushioning against turbulent swings. As always, rigorous personal research and careful consideration of investment goals remain paramount before committing capital.
Note: This article incorporated insights from a former Bankrate reporter to enhance its breadth and accuracy.
Editorial Disclaimer: All investors should conduct their own due diligence on investment strategies before making any decisions. Remember that historical performance is not synonymous with guaranteed future results.
