3 Defensive ETFs for Current Volatility

Lan Anh Tran: Investing can feel precarious right now between stubborn inflation, a volatile stock market, and looming geopolitical risk. But remember what matters the most: your long-term financial outcome, not these short-term challenges.

To help you stay invested, here are three great ETFs to help shore up your portfolio defense against the current market volatility.

3 Defensive ETFs for Current Volatility

1. Vanguard Short-term Inflation-Protected Securities ETF VTIP
2. SPDR MSCI EAFE StrategicFactors ETF QEFA
3. Vanguard Dividend Appreciation ETF VIG

First up is Vanguard Short-term Inflation-Protected Securities ETF, ticker VTIP, which has a Morningstar Medalist Rating of Gold.

Inflation-protected securities, or TIPS, protect against inflation by adjusting their principal amount upward as inflation picks up. You get a higher periodical interest payment as things get pricier, and if the inflation persists when these bonds mature, a higher principal payment as well. TIPS also carry very little credit risk. They are a type of Treasury bond, which means they are backed by the full financial power of the US government.

Adding short-term TIPS to the portfolio, such as VTIP, can help your returns keep up with inflation without much additional credit or interest-rate risk.

On the equity side, Silver-rated SPDR MSCI EAFE StrategicFactors ETF, ticker QEFA, is another defensive ETF option that targets international stocks.

This ETF captures stocks from developed markets that exhibit value, quality, and low-volatility characteristics. The combination of these factors dials down the fund’s risk level and zooms in on profitable foreign firms that insulate themselves well from the ups and downs in the market.

QEFA’s defensive stance is its offense. The ETF beat the MSCI EAFE Index by 50 basis points annually between its 2014 inception and February 2025. While that might not seem like much at a glance, it has consistently shielded investors through market shocks in the last decade. Global-minded investors can rest easy knowing this high-quality, low-volatility ETF will lessen the blunt of foreign market wobbles on their portfolio.

Finally, bringing us to the home stretch is Gold-rated Vanguard Dividend Appreciation ETF, ticker VIG.

This ETF sweeps in US stocks that have been increasing their dividends for at least 10 consecutive years. The result of such strict requirements? A lineup of stable and profitable market giants the likes of Microsoft or Procter & Gamble. They tend to be more profitable than the broader market, have a wide economic moat, and yet, on average, not much more expensive than the typical large-cap stock.

VIG has outperformed the US stock market during some of the worst crises in recent history, from the 2008 financial crisis to the 2022 market meltdown. This high-quality portfolio will guard your dividend payout, and your returns too.

Watch 3 Great International Dividend ETFs for 2025 for more of our ETF picks.