Motley Fool suggests three ETFs for recession resilience

The Motley Fool recommends three exchange-traded funds for investors expecting a U.S. recession, arguing that holding diversified baskets is preferable to selling equities during downturns. The publication notes that the S&P 500 has experienced ten official recessions since its inception in 1957 and has still delivered a total annual return of 10% despite steep double-digit drawdowns in bear markets.

The first recommendation is the Vanguard Healthcare ETF (VHT), which tracks the MSCI U.S. Investable Market 25/50 Healthcare Index. The fund charges a 0.09% expense ratio and holds 416 stocks. Its top holdings include Eli Lilly at 12.8%, Johnson & Johnson at 8.7%, AbbVie at 6.3%, Merck at 5%, and UnitedHealth Group at 4.9%. The index uses a rule that prevents any single stock from exceeding 25% of total assets and limits the combined weight of stocks exceeding 5% to no more than 50% of the portfolio. This structure keeps the fund diversified and compliant with IRS rules for Regulated Investment Companies. Since its inception in January 2004, VHT has delivered a total return of 757% and carries a 30-day SEC yield of 1.2%.

The second suggestion is the Vanguard Total Bond Market ETF (BND), which holds 11,421 bonds with an average yield to maturity of 5%. The fund charges a 0.03% expense ratio and has a 30-day SEC yield of 5.1%. Its top holdings consist of U.S. government bonds at 68.9%, BBB-rated bonds at 12.3%, and A-rated bonds at 12.1%. The Motley Fool posits that if a recession prompts the Federal Reserve to cut interest rates, the prices of older bonds with higher-yielding coupons will rise, making BND a stable option for income-oriented investors. Since its inception in April 2007, BND has delivered a total return of 73%.

The third recommendation is the Vanguard S&P 500 ETF (VOO), which passively tracks the S&P 500 with a 0.03% expense ratio. The fund is rebalanced quarterly to include the country's 500 largest companies, providing exposure to major holdings such as Nvidia, Apple, Microsoft, Amazon, and Alphabet. Since its inception in September 2010, VOO has delivered a total return of 827%. The publication asserts that while VOO may experience more volatility than VHT or BND during a market crash, it should recover as long as America's largest companies continue to grow revenues and profits.