Stock Market Sell-Off: 2 No-Brainer Vanguard Index Funds to Buy With $500 Right Now

The U.S. stock market has fallen sharply as trade tensions have escalated under the Trump administration. The benchmark S&P 500 (SNPINDEX: ^GSPC) is currently 16% below the record high it reached two months ago, and the technology-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) is down 21%.

Historically, stock market drawdowns have been excellent buying opportunities. Here are two no-brainer Vanguard index funds worth owning, and neither one costs more than $500 per share.

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Vanguard S&P 500 ETF: An index fund that diversifies capital across many of the most influential stocks in the world

The Vanguard S&P 500 ETF (NYSEMKT: VOO) measures the performance of the S&P 500, which itself tracks 500 large U.S. stocks that span all 11 market sectors. The index fund lets investors spread capital across many of the most influential businesses in the world. The five largest holdings are listed by weight below:

1. Apple: 7%

2. Microsoft: 5.8%

3. Nvidia: 5.5%

4. Amazon: 3.7%

5. Alphabet: 3.4%

As mentioned, the S&P 500 is currently 16% below its high, which puts the index in market correction territory. That is a no-brainer buying opportunity for patient investors because the S&P 500 has historically generated robust returns over the year following its first close in correction territory, and it has eventually recovered from every past drawdown.

Also, despite seven corrections and three bear markets, the S&P 500 returned 585% in the last two decades, compounding at 10.1% annually. That period encompasses such a broad range of economic conditions that investors can be reasonably confident in similar returns over the next two decades.

Finally, the Vanguard S&P 500 ETF has a below-average expense ratio of 0.03%. That means shareholders will pay just $3 annually on every $10,000 invested in the fund.

Image source: Getty Images.

Vanguard Utilities ETF: An index fund that tracks essential utilities stocks that may outperform as tariffs hit the economy

The Vanguard Utilities ETF (NYSEMKT: VPU) measures the performance of 69 companies in the utilities sector. Its invested assets are most heavily allocated toward electric utilities (62%) and multi-utility companies (25%), though the index fund also provides exposure to water and gas utilities. The five largest holdings are listed by weight below:

1. NextEra Energy: 10.9%

2. Southern Company: 7.5%

3. Duke Energy: 7%

4. Constellation Energy: 4.7%

5. American Electric Power: 4.3%

Utilities stocks are generally viewed as defensive investments because demand tends to persist through ups and downs in the economy. Consumers and businesses always need water and electricity. Consequently, the utilities sector has historically outperformed during recessions. That makes the Vanguard Utilities ETF a smart buy for investors who are worried about an economic downturn.

Also, the utilities sector has less exposure to international revenue than any other market sector because the vast majority of their services are domestic. That means utilities stocks may be among the least affected by the tariffs imposed by President Trump. Morgan Stanley strategists recently wrote, “If tariffs are robust and long-lasting, defensive stocks in sectors such as healthcare and utilities may outperform.”

Importantly, the Vanguard Utilities ETF has a below-average expense ratio of 0.09%. That means shareholders will pay just $9 annually on every $10,000 invested in the fund.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Constellation Energy, Microsoft, NextEra Energy, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends Duke Energy and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.