1 Top Vanguard ETF to Buy Before the Next Market Crash

Why Getting Ready for Rough Markets Matters (ELI5 Style)

Imagine you know a big storm might show up someday. You wouldn’t wait until the rain starts to go buy an umbrella, right? The same idea applies to investing.

Most people don’t want the stock market to crash (when prices fall sharply) or go into a “bear market” (a long downturn). But as Benjamin Franklin supposedly said: “Failing to prepare is preparing to fail.” In simple terms: it’s smarter to get ready before bad times arrive than to be caught off guard.

Important: Being “proactive” means doing something now to help your future self. For investors, that means setting up a plan before the market gets scary.

Meet the Vanguard High Dividend Yield ETF (VYM): Your Crash Insurance

One way to prepare without giving up too much good stuff (like potential gains) is to look at the Vanguard High Dividend Yield ETF (traded under the symbol VYM on the NYSEMKT).

• An ETF (Exchange‑Traded Fund) is like a basket that holds many stocks at once. Buying one share lets you own a tiny piece of all of them.
• VYM is the third‑largest dividend ETF—a fund focused on companies that pay dividends.
• A dividend is a small cash gift a company sends to its owners (shareholders) out of its profits.
• Stocks that pay dividends tend to be less volatile (their prices don’t jump up and down as wildly) compared to companies that don’t pay dividends. That calmer behavior gives VYM a “buffer” during bad times.

The original article included this picture note: “This Vanguard ETF can offer some protection during market downturns. Image source: Getty Images.” (The image showed the word “yield” on wood.)

Quick Side Note (from the original text):
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We include this for completeness—it’s an advertisement, not part of the VYM explanation.

Details Matter with the VYM ETF

VYM is a big, popular fund:

• It holds about $96.1 billion in assets (that’s the total pool of money investors have put in). This shows many people trust it.
• Because it pays income and is less bumpy, it’s appealing to retirees (people no longer working) and to any investor wanting to balance a growth‑focused portfolio.
• Over the past ten years, its annualized volatility (how much it bounced around each year) was 170 basis points (remember: 1 basis point = 0.01%, so 170 = 1.70 percentage points) lower than the Vanguard S&P 500 ETF (VOO), which tracks the whole U.S. market.
• The trade‑off: VYM grew a bit slower than the market in good times, but it’s a durable income generator with real protection credentials.

Not All “High Yields” Are the Same

When we say “dividend yield,” we mean the yearly cash dividend divided by the stock price (shown as a percent). There are stocks with high yields and those with SUPER HIGH yields.

• Some super‑high yields are “yield traps” or “dividend offenders”: the company may be in trouble and could cut the payment to save cash.
• VYM’s yield is 2.3%—more than double the S&P 500’s yield, but not so high as to ring alarm bells.
• The fund contains 605 stocks, many of which are “blue chip dividend stocks” (big, reliable companies that pay steady dividends).

Important: A “yield trap” is when a dividend looks huge only because the stock price fell a lot, but the company might soon stop paying it. VYM avoids this by owning quality firms.

Strong Companies Inside the Basket

Some of VYM’s top holdings are:

• Caterpillar (makes tractors and construction gear)
• ExxonMobil (a giant oil company)
• Johnson & Johnson (a healthcare leader)

These companies have raised their dividends every year for decades—even through bear markets and recessions. Think of it as getting a slightly bigger allowance each year no matter what the economy does.

More Things to Like About VYM

Here are two extra reasons the article calls VYM one of the best Vanguard ETFs:

• Compounding helper: You can use the dividends you receive to buy more shares when prices are low. This is called compounding, and it positions you for rebounds (since U.S. stocks don’t stay down forever).
• Rock‑bottom cost: True to Vanguard’s style, VYM charges only 0.04% per year. On a $10,000 investment, that’s just $4 in fees—so very little of your money is eaten by costs during rough markets.

Should You Buy VYM Right Now? (Plus a Publisher Note)

The original article advises: before buying VYM, consider this—

The Motley Fool’s Stock Advisor analyst team say they’ve identified the 10 best stocks to buy now… and VYM was not one of them. Those 10 are aimed at long‑term growth and could produce big returns.

They give past examples:

• If you’d invested $1,000 in Netflix when they recommended it on Dec 17, 2004, you’d have about $395,679 today.*
• If you’d invested $1,000 in Nvidia on Apr 15, 2005, you’d have about $1,294,805 today.*

They state their service has a track record of beating the S&P 500 by 4 times and invite readers to see the latest top 10 list.

Disclaimer / Important Points from the source:

• Stock Advisor returns cited as of July 12, 2026.
• Author Todd Shriber owns shares of Vanguard S&P 500 ETF (VOO).
• The Motley Fool owns/recommends Caterpillar, VYM, VOO, and recommends Johnson & Johnson.
• This article was originally published by The Motley Fool (title: “1 Top Vanguard ETF to Buy Before the Next Market Crash”).

Summary

• Nobody likes market crashes, but preparing early is wise (like packing an umbrella before rain).
• The Vanguard High Dividend Yield ETF (VYM) is a giant fund holding steady, dividend‑paying blue‑chip companies.
• It has been less volatile than the broader market by 1.70 percentage points over a decade, pays a 2.3% yield, and costs only $4 per $10,000 yearly.
• Its top holdings have raised dividends for decades, offering a cushion in tumultuous times.
• The publisher notes VYM isn’t in their “10 best stocks” growth list, but it remains a solid defensive tool.
• Always understand what you’re buying and remember all investments carry some risk.

FAQ

1. What is an ETF in kid‑friendly terms?
An ETF is like a pre‑made lunchbox containing many different snacks (stocks). When you buy one ETF share, you get a tiny bite of every snack inside.

2. What is a dividend, and why does it matter?
A dividend is cash a company shares with its owners. It’s like a lemonade stand giving you a few coins from its earnings just for being a part‑owner.

3. Why are dividend stocks usually less volatile?
Companies that pay dividends are often older and steadier. Investors hold them for the income, so they don’t panic‑sell as much, keeping prices calmer.

4. What does “170 basis points lower volatility” mean?
A basis point is 1/100 of a percent. So 170 basis points = 1.70%. VYM’s yearly price swings were 1.70% less wild than the S&P 500 fund.

5. Is VYM a guarantee against losing money?
No. It can still drop when the market crashes, but historically it has been a softer landing than many other funds.