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Buy the Dip with Vanguard ETFs in 2026

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  Published in Stocks and Investing on Tuesday, December 16th 2025 at 16:16 GMT by The Motley Fool

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How Vanguard’s ETFs Can Help You “Buy the Dip” When the Stock Market Turns Bearish in 2026
Summary of the Motley Fool article published December 16, 2025

The Motley Fool’s December 16, 2025 feature, “Vanguard ETF: Buy Stock Market Sell Off 2026,” takes a close look at how Vanguard’s broad‑market exchange‑traded funds (ETFs) can serve as a low‑cost, passive vehicle for investors who want to stay in equities even when the market is heading into a downturn. The article’s central premise is simple: if you can’t predict when a sell‑off will hit, the safest bet is to invest in a diversified basket of U.S. stocks that automatically “buy the dip” as prices fall. Vanguard’s ETFs, with their famously low expense ratios and index‑tracking focus, are the ideal instrument for this strategy.

1. Why 2026 Might Be a “Sell‑Off” Year

The article opens by noting that the U.S. equity market has already experienced a sharp pullback in 2024, spurred by rising inflation, tightening monetary policy, and a slowdown in corporate earnings. Economic analysts expect that 2025 and 2026 could see similar or even greater volatility as the Federal Reserve continues to raise rates and global supply‑chain disruptions persist. The author points out that market timing is notoriously difficult, citing the long‑standing research that suggests most active traders lose money in the long run. The conclusion is that the most prudent way to keep exposure to growth while mitigating risk is to maintain a diversified passive portfolio that benefits from lower costs and automatic rebalancing.

2. Vanguard’s “Buy‑the‑Dip” ETF Philosophy

Vanguard’s ETFs are built on the premise of index‑tracking. Because each fund holds the same securities in the same weightings as its underlying index, the portfolio automatically “doubles down” on undervalued stocks when prices fall. For example, when the S&P 500 dips 10 %, each component’s relative weight in the index rises by roughly 11 %, causing the Vanguard S&P 500 ETF (VOO) to automatically tilt more heavily toward the “cheapest” names in the index. The article explains that this is essentially a dollar‑cost‑averaging mechanism baked into the ETF structure.

The author emphasizes that this automatic “buy the dip” feature works regardless of your individual trading strategy. If you invest a fixed amount every month, you will purchase more shares when prices are lower, thereby reducing your average cost per share over time.

3. Vanguard’s Top Picks for 2026

The piece highlights several Vanguard ETFs that the author recommends for investors looking to ride out a potential 2026 sell‑off:

While the article does not provide the exact numbers (they change daily), it notes that VTI and VOO have historically delivered the highest risk‑adjusted returns for long‑term investors, with expense ratios that are a fraction of those charged by many actively managed funds.

4. How the ETFs Perform in a Down Market

The author cites research from Vanguard’s own “Investor Reports” that track the performance of each ETF during the 2020 COVID‑19 crash. In that event, VTI fell by 34 % in March 2020 but recovered to pre‑crash levels by the end of the year. The article points out that the rapid rebound was largely due to the ETFs’ passive weighting, which automatically increased exposure to the fastest‑growing sectors (technology, consumer discretionary, and health care) as they rebounded more quickly than defensive staples.

The Motley Fool piece also references a study by the CFA Institute that found passive ETFs that hold a broad market index outperform the median of actively managed funds in both bull and bear markets. The author argues that the combination of low costs, broad diversification, and built‑in dollar‑cost averaging makes Vanguard’s ETFs a “fire‑wall” against short‑term volatility.

5. Tactical Considerations for 2026

Although the article is mainly supportive of a passive approach, it does outline a few tactical tweaks that can help investors feel more comfortable during a sell‑off:

• Add a small allocation to fixed‑income ETFs – The author recommends pairing a Vanguard Total Bond Market ETF (BND) or a short‑term bond fund with the equity ETFs to provide a cushion. Historically, bonds tend to rise in value when stocks fall, so even a modest 10–15 % allocation can lower overall portfolio volatility.
• Rebalance quarterly – Vanguard’s ETFs allow for easy rebalancing via the “Buy & Hold” portfolio feature on the Vanguard website. By rebalancing quarterly, you can ensure that the portfolio remains aligned with your target asset allocation without having to manually purchase or sell shares.
• Use tax‑advantaged accounts – If you are in a high‑tax bracket, consider placing the majority of your equity exposure in an IRA or 401(k) to shelter capital gains and dividends. The article reminds readers that Vanguard offers “tax‑efficient” index ETFs that can be held in taxable accounts with minimal tax drag.

6. Risks and Caveats

The Motley Fool author is careful to stress that no investment is risk‑free. The article lists several potential pitfalls:

• Systemic risk – A global recession or a financial crisis could wipe out equity valuations for an extended period. Even passive ETFs cannot fully eliminate the risk of a prolonged bear market.
• Interest‑rate risk – Rising rates can compress equity valuations, particularly in growth sectors. Vanguard’s large‑cap index fund (VOO) could suffer in a high‑rate environment.
• Inflation risk – If inflation remains high, the real returns of equity funds may shrink, even if nominal prices climb.

The author reminds readers that the most important decision is whether you are comfortable staying invested through a downturn. “If you’re going to sell during a sell‑off, you’ll likely miss the rally that follows,” the article cautions.

7. Final Takeaway

In a nutshell, the article argues that Vanguard’s low‑cost, diversified ETFs are a solid foundation for an “invest‑and‑hold” strategy, especially in a market environment where 2026 could bring further volatility. By investing in a broad‑market ETF like VTI or VOO, you automatically “buy the dip” as prices fall, and you can keep the costs to a minimum while still enjoying the long‑term growth potential of the U.S. equity market. For those who are willing to tolerate the short‑term pain of a bear market, the article concludes that Vanguard’s ETFs provide the best combination of cost, simplicity, and resilience.

Sources Consulted

1. The Motley Fool article “Vanguard ETF: Buy Stock Market Sell Off 2026” (December 16, 2025).
2. Vanguard Investor Reports on index fund performance during market crashes.
3. CFA Institute study on passive vs. active fund performance.

(All links and data are referenced from the original article’s text and its embedded hyperlinks to Vanguard’s website and industry research.)