2 ETFs Under $50 Built for a Bear Market

With all of the uncertainty swirling around the economy, the stock market has been moving one step forward and two steps back. The S&P 500 dipped into correction territory in March — falling 10% from its peak level — before emerging from that fearful status in April. Worse, the threat of an economic recession continues to loom. These volatile markets could turn into a bear market at any given point, and investors are reminded of this possibility almost daily. 

One way for investors to protect their portfolio from the storm is to take a defensive approach. We’ve identified a couple of ETFs that will not be too hard on the wallet and are designed to withstand a bear market. Both the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) and the Franklin U.S. Low Volatility High Dividend Index ETF (LVHD) ETFs are trading for roughly $50 or less. Perhaps more importantly is the fact that they are built to withstand the challenges of a bear market. 

Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP)

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF (VTIP) trades for just under $50 as of May 2025, a key criterion for including this ETF among the cohort of funds built for a bear market. In true Vanguard fashion, VTIP offers an attractive expense ratio of 0.03% alongside a hefty total net assets of $58.5 billion. With 26 bonds comprising VTIP and an average coupon of 1%, this ETF’s fixed income strategy is highly defensive, offering investors a two-pronged model as an escape from stock market volatility and a hedge of protection from economic inflation.

TIPs are fixed income instruments whose principal value changes alongside fluctuations in consumer prices, thereby guarding an investor’s purchasing power. The VTIP ETF offers investors a way to outperform nominal, or non-inflation-protected, Treasuries, all while inflation threatens to rear its head once again.

In 2025, VTIP makes our list due to the numerous headwinds that are likely to continue impacting inflation in the economy. These include trade war uncertainty, rising U.S. government debt, and fallout from the recent debt downgrade by credit rating agency Moody’s. As of March 2025, TIPS yields had risen to their highest level in 20 years, paving the way for investors to pile on in anticipation of persistent inflation.

VTIP is also a good choice for capital preservation during a bear market, which becomes increasingly important to investors across age groups during a market decline.

During a bear market, investors want to be careful not to take a ‘set it and forget it’ approach. In the case of VTIP, investors should keep an eye out for any signs of deflation, as this could have the opposite of the desired effect on their investment. Deflation, when consumer prices steadily fall, would pressure the principal value of the TIPs in this ETF. The good news is that investors are still entitled to the face value of TIPS, even in a deflationary economy. 

Franklin U.S. Low Volatility High Dividend Index ETF (LVHD)

Our next ETF represents the best of both worlds – low volatility and dividend income during a bear market. The Franklin U.S. Low Volatility High Dividend Index ETF (LVHD) currently trades for approximately $39, making it a strong contender for one of the best ETFs to choose during a bear market. Boasting a dividend yield of 3.9%, the LVHD ETF kicks off with the 3,000 stocks comprising the Russell 3000 index, targeting only those that pay the highest and most sustainable dividends without taking investors on too much of a roller coaster ride.

With nearly $560 million in assets, this ETF has attracted big institutions including Morgan Stanley, LPL Financial, Bank Of America, UBS Group, Wells Fargo and many others. Returns are competitive, including 15% over the past year, surpassing the performance of the Russell 3000’s 11.4% return in the same stretch. By investing in the LVHD ETF, you gain exposure to various sectors of the economy, including consumer staples and utilities—both of which are inherently defensive during a bear market cycle.

Top holdings in LVHD include popular dividend payers, including Verizon Communications (NYSE: VZ), Altria Group (NYSE: MO), Lockheed Martin (NYSE: LMT), Cisco Systems (Nasdaq: CSCO), Johnson & Johnson (NYSE: JNJ), Chevron (NYSE: CVX) and Mondelez (Nasdaq: MDLZ), among others. Let’s check out a few of their dividend-paying histories. In 2024, Verizon made cash distributions of over $11.2 billion. As a consumer staple stock, Altria Group has an impressive track record of dividend hikes over the past five decades. Aerospace giant Lockheed Martin has been raising its annual dividend consistently over the past couple of decades.

Investors can generally expect to earn a steady income stream from the LVHD ETF, which can offset any capital losses in a portfolio during a bear market cycle. 

Defensive Investing

Both VTIP and LVHD fit the criteria for defensive bets in a bear market cycle. Investors could choose the inflation protection that TIPs have to offer or steady income and low volatility with LVHD. With these options, investors won’t have to sit on the fence—even when the bottom has fallen out of the stock market.

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