Navigating Turbulence: The Lowest Risk Vanguard Funds for Cautious Investors

In today’s unpredictable market many investors are asking the same question what is the lowest risk Vanguard fund I can invest in to protect my hard-earned money? If you’re looking to shield your portfolio from volatility while still generating some returns, you’re in the right place. I’ve researched Vanguard’s safest investment options to help you weather market storms.

Why Consider Low-Risk Vanguard Funds?

Vanguard funds have earned their reputation as practical tools for buy-and-hold investors. Their straightforward strategies, broad diversification, and notably low expense ratios make them ideal vehicles for those who prefer to let compounding do the heavy lifting over decades

But what if you need protection right now during market uncertainty? That’s where low-risk Vanguard funds come into play

The 5 Lowest Risk Vanguard Funds for Volatile Markets

Let’s dive into the safest Vanguard funds that can help you maintain stability when markets get rocky:

1. Vanguard Ultra-Short Bond ETF (VUSB)

Type: Ultra-short bond
Assets under management: $5.8 billion
SEC yield: 4.8%
Expense ratio: 0.10%

When market turbulence strikes, bonds often become the safeguard of choice. The Vanguard Ultra-Short Bond ETF (VUSB) is perhaps the lowest risk Vanguard fund available for those seeking maximum protection.

Why it’s ultra-safe:

• Holds bonds with maturities under two years
• Contains approximately 1,110 different debt issues
• Almost the entire portfolio has investment-grade ratings
• Has shown remarkable stability with a 4.3% gain year-to-date
• Extremely low expense ratio of just 10 basis points annually

For investors who find individual bonds difficult to research and purchase, VUSB offers an instant diversified fixed-income portfolio with a high likelihood that the bonds will be fully repaid.

2. Vanguard Health Care ETF (VHT)

Type: Sector (Health Care)
Assets under management: $15.3 billion
Dividend yield: 1.4%
Expense ratio: 0.09%
Also available as: Vanguard Health Care Index Fund Admiral Shares (VHCIX, 0.09% expenses, $100,000 minimum investment)

Health care stocks offer defensive qualities because of their essential services. After all, people can’t stop taking medications or seeing doctors when the economy slows down.

Why it’s low-risk:

• Health care spending is projected to grow at 5.6% annually through 2032
• Provides access to 400 health care stocks for minimal fees
• Market cap-weighted structure with 66% in mega- and large-cap stocks
• Includes exposure to potential high-growth smaller biotech companies
• Top holdings include stable giants like UnitedHealth Group, Eli Lilly, and AbbVie

This fund gives you broad exposure to a defensive sector that historically weathers economic downturns better than most.

3. Vanguard Consumer Staples ETF (VDC)

Type: Sector (Consumer Staples)
Assets under management: $7.2 billion
Dividend yield: 2.2%
Expense ratio: 0.09%
Also available as: Vanguard Consumer Staples Index Fund Admiral Shares (VCSAX, 0.09% expenses, $100,000 minimum investment)

Consumer staples represent another defensive sector that tends to remain resilient during market volatility. When budgets tighten, people might cut back on entertainment or dining out, but they’ll still buy essentials like toilet paper, toothpaste, and basic food items.

Why it’s a safe harbor:

• Covers over 100 companies specializing in human necessities
• Includes stable giants like Procter & Gamble and Mondelez International
• Features major retailers like Walmart, Costco, and Target
• Also holds consumer staples like Altria and Constellation Brands
• Low expense ratio of just 0.09%

This ETF gives you exposure to companies that sell products people buy regardless of economic conditions.

4. Vanguard High Dividend Yield ETF (VYM)

Type: Dividend stock
Assets under management: $65.9 billion
Dividend yield: 2.5%
Expense ratio: 0.06%
Also available as: Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX, 0.08% expenses, $3,000 minimum investment)

Dividend stocks have historically outperformed non-dividend payers during market uncertainty. According to Merrill, dividend stocks provide investors with income to meet liquidity needs and have demonstrated the ability to lower volatility and buffer losses during market drawdowns.

Why it’s relatively safe:

• Contains 565 high-yielding stocks with a collective yield of 2.6%
• Significant allocation to defensive sectors (health care at 12.4%, consumer staples at 9.3%)
• Includes blue chip stocks like Home Depot, ExxonMobil, and JPMorgan Chase
• Extremely low expense ratio of 0.06%
• Outperformed the S&P 500 during periods of volatility in early 2025

While VYM does have significant exposure to financial stocks (21.6%), which aren’t typically considered defensive plays, its overall dividend focus helps provide stability.

5. Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX)

Type: Minimum-volatility global stock
Assets under management: $2.1 billion
Dividend yield: 1.7%
Expense ratio: 0.21%
Minimum investment: $3,000

This actively managed fund aims to provide minimum volatility compared to the global equity market, making it one of the safest Vanguard funds for those who want to stay in equities.

Why it’s designed for stability:

• Focuses on identifying low-volatility stocks globally
• Maintains diversification across sectors but with a defensive tilt
• Overweights health care (12.2%) and consumer staples (9.6%) compared to category averages
• Underweights more volatile sectors like technology and consumer discretionary
• 63.7% allocation to American stocks with the remainder spread across stable international markets

Understanding Different Low-Risk Strategies

When searching for the lowest risk Vanguard fund, it helps to understand the different approaches to reducing volatility:

Low-Vol vs. Min-Vol Funds

• Low-volatility ETFs evaluate a universe of stocks and select those with the least historical volatility, potentially creating concentrated portfolios (like all utilities).
• Minimum-volatility ETFs try to minimize volatility while still resembling a benchmark, often maintaining exposure across all sectors but tilting toward stability.

VMVFX exemplifies the minimum-volatility approach, maintaining diversification while making strategic adjustments to reduce overall portfolio volatility.

Ultra-Short Bonds vs. Other Bond Types

When it comes to fixed income, shorter-term bonds generally present less risk. There’s simply less time for something to go wrong during a one-year bond than a 30-year bond.

The Vanguard Ultra-Short Bond ETF (VUSB) represents the lowest-risk option in Vanguard’s bond lineup because it:

• Focuses exclusively on bonds maturing in less than two years
• Primarily holds investment-grade debt
• Provides high liquidity
• Offers competitive yields (currently 4.8%)

How to Choose the Right Low-Risk Vanguard Fund

When selecting the lowest risk Vanguard fund for your portfolio, consider these factors:

1. Your time horizon: How soon will you need the money? For very short timeframes (under 2 years), VUSB might be best.

2. Your risk tolerance: Can you handle any volatility at all? If not, ultra-short bonds are your friend. If you can accept some fluctuation, defensive equity sectors might work.

3. Income needs: Do you require regular income from your investments? VYM might be your best bet despite slightly higher volatility.

4. Tax considerations: Some of these funds are available in both ETF and mutual fund format, which can have different tax implications.

5. Investment amount: Some fund versions have higher minimums ($100,000 for VHCIX vs. no minimum for VHT).

Creating a Low-Risk Portfolio with Vanguard Funds

For the absolute lowest risk, you might consider a simple portfolio like:

• 70% Vanguard Ultra-Short Bond ETF (VUSB)
• 15% Vanguard Health Care ETF (VHT)
• 15% Vanguard Consumer Staples ETF (VDC)

This combination would provide stability from the short-term bonds while allowing for some potential growth from defensive equity sectors.

For slightly more growth potential with still-reduced risk:

• 50% Vanguard Ultra-Short Bond ETF (VUSB)
• 25% Vanguard High Dividend Yield ETF (VYM)
• 25% Vanguard Global Minimum Volatility Fund (VMVFX)

Things to Remember About Low-Risk Investing

While seeking the lowest risk Vanguard fund is prudent during volatile markets, remember:

1. Lower risk typically means lower long-term returns. These funds might underperform during bull markets.

2. No investment is completely risk-free. Even the safest Vanguard funds can experience some price fluctuation.

3. Markets eventually stabilize. If you’re using these funds for short-term defense, pay attention to changing conditions and be ready to adapt.

4. Vanguard’s low expenses are a key advantage. When returns are modest in low-risk investments, keeping costs down is crucial.

The Vanguard Ultra-Short Bond ETF (VUSB) stands out as potentially the lowest risk Vanguard fund for investors seeking maximum protection. However, defensive equity sectors like health care and consumer staples can also provide relative stability while offering more growth potential.

The beauty of Vanguard’s lineup is that you can easily mix and match these funds to create a portfolio that meets your specific risk tolerance and investment goals. By focusing on these five funds—VUSB, VHT, VDC, VYM, and VMVFX—you can navigate market volatility while keeping your investment costs extraordinarily low.

Remember, the goal isn’t necessarily to avoid all risk but to take only the risks that are appropriate for your personal situation. These lowest risk Vanguard funds give you the tools to do just that.

Have you invested in any of these funds? I’d love to hear about your experience in the comments below!

Warren Buffett recommends that most investors buy a low-cost S&P 500 index fund and specifically suggests the Vanguard S&P 500 ETF (VOO).