iShares and two other ETFs emerge as crash shelters

The S&P 500 shed roughly 11% between April 3 and April 8, 2025, and investors who fled to cash missed the partial rebound that followed within days, according to Morningstar’s Global Markets Index data. Selling into a selloff feels like self-preservation, but the math tells a different story over five- and ten-year periods for investors who stepped aside. Three ETFs offer a less extreme option, each designed to keep you invested in the market while absorbing significantly less damage when stocks crater. One builds a low-volatility stock portfolio from the ground up, another layers options contracts on top of the S&P 500, and the third hedges against inflation with short-term government bonds. Morningstar recently spotlighted all three as defensive holdings for the current environment, and the details of how each works reveal important trade-offs you need to weigh before buying.iShares’ USMV uses a portfolio-level approach The iShares MSCI USA Minimum Volatility Factor ETF (USMV) earned a Silver Morningstar Medalist Rating for its consistent ability to limit drawdowns over full market cycles. You might assume a low-volatility fund simply buys the least volatile stocks and calls it a day, but USMV operates differently from most of its peers.The fund uses a portfolio-level optimizer that evaluates how individual stocks interact with each other, not just how volatile each stock is on its own, according to BlackRock’s fund documentation. That means USMV can include relatively volatile names like Nvidia if those stocks tend to move in the opposite direction of the rest of the portfolio, creating natural diversification. The result is a fund that delivered 20% less volatility than the broader market over its 10-year track record while nearly matching its category peers’ total return, Morningstar’s research shows.What USMV costs and who should consider it for long-term portfolio defenseUSMV charges an expense ratio of 0.15%, which is 65% lower than the average large-blend fund, and holds roughly 170 stocks across diversified sectors, according to iShares’ fund page.The fund currently manages approximately $23 billion in total assets, making it one of the largest minimum-volatility ETFs available to retail investors today. "Most low-volatility ETFs look at each stock independently, resulting in a portfolio of similar companies with shared risks. USMV plays defense at the portfolio level, looking for the optimal set of low-volatility companies based on how they interact with one another, said Manager Research Analyst Zachary Evens.You should understand that USMV will almost certainly lag during strong bull market rallies because the fund sacrifices upside in exchange for shallower drawdowns.Key fund details for USMVExpense ratio: 0.15% annually, with a portfolio turnover rate of about 22%.Morningstar Medalist Rating: Silver, affirmed in April 2025.Sector constraint: No sector weighting can deviate more than 5% from the broader U.S. equity market.Inception: October 2011, giving investors over a decade of live performance data to evaluate.If you are the type of investor who checks your brokerage app every morning and panics at red numbers, USMV could prevent you from making a costly emotional decision. The fund’s sector constraint keeps it from loading up on utilities and healthcare the way some competing low-volatility products do, which reduces concentration risk.JPMorgan’s HELO pairs stocks with options to cap your losses at roughly 5%The JPMorgan Hedged Equity Laddered Overlay ETF (HELO) takes a completely different approach to defense by combining a stock portfolio with protective put options. The fund earned a Bronze Morningstar Medalist Rating and has attracted roughly $3.8 billion in assets since its September 2023 launch, according to J.P.

Morgan Asset Management.Hedged Equity Laddered Overlay managers buy protective put options set approximately 5% below the current S&P 500 price, which caps potential losses to around 5% over rolling three-month periods. That protection comes with a trade-off, because the fund also limits your upside and re-exposes you to losses if the S&P 500 falls more than 20% in a three-month window. JPMorgan Chase’s HELO ETF limits losses near 5% using options, offering downside protection while capping upside and long-term gains potential.VIEW press/Getty Images How HELO’s laddered options strategy has performed since its 2023 launchSince its inception roughly 2.5 years ago, HELO has delivered only 60% of the S&P 500’s volatility while capturing just 61% of the index’s downside moves, Morningstar’s analysis found.That means if the S&P 500 drops 10% in a quarter, HELO investors have historically experienced a loss of about 6%, which is a meaningful difference when compounded over several market cycles.The fund charges a 0.50% expense ratio, which is meaningfully higher than USMV’s 0.15% fee, but the cost reflects active management and the expense of maintaining a continuous options overlay. You are paying for a specific kind of insurance here, and whether that cost is worth it depends entirely on how much volatility you can tolerate in your retirement or taxable account.More Tech Stocks:Morgan Stanley sets jaw-dropping Micron price target after eventNvidia’s China chip problem isn’t what most investors thinkQuantum Computing makes $110 million move nobody saw comingHELO uses a “laddered” structure that staggers its option positions across three overlapping three-month periods, with each hedge shifted one month from the next, according to J.P. Morgan’s fund prospectus. This design prevents the fund from being fully exposed during any single options expiration cycle, a vulnerability that some simpler hedged-equity strategies suffer from.The fund is best suited for investors who want to maintain meaningful equity exposure but cannot afford a catastrophic short-term loss, such as someone within five years of retirement. If you are 30 years old with decades of compounding ahead, HELO’s capped upside will likely cost you more in foregone gains than the protection saves you over time.Vanguard’s VTIP protects specifically against the inflation risk The Vanguard Short-Term Inflation-Protected Securities ETF (VTIP) earns a Gold Morningstar Medalist Rating and addresses a risk that neither USMV nor HELO is designed to handle. VTIP invests in Treasury Inflation-Protected Securities with maturities under five years, meaning the bonds’ principal adjusts upward as the Consumer Price Index rises, according to Vanguard’s fund documentation.You receive higher interest payments as inflation increases, and if inflation persists when those bonds mature, you also receive a higher principal payment upon maturity.Key fund details for VTIPExpense ratio: 0.03%, making it one of the cheapest inflation-protection funds available anywhereTotal assets: Approximately $65 billion, reflecting enormous institutional and retail investor demandCredit risk: Virtually none, because the bonds are backed by the full faith and credit of the U.S. governmentMorningstar Medalist Rating: Gold, affirmed in November 2025VTIP carries very little credit risk and minimal interest-rate risk due to its short duration, making it less sensitive to Federal Reserve policy changes than longer-dated bonds.When VTIP fits and when it could work against your portfolio goalsVTIP is not a substitute for stock exposure, and it will not deliver equity-like returns over any meaningful time horizon, so think of it as a stabilizer rather than a growth engine. The fund’s five-year annualized return sits at roughly 3.7%, which barely outpaces inflation in a normal environment, according to Morningstar’s performance data.You should consider VTIP if you are concerned about a resurgence in consumer prices driven by tariffs, supply-chain disruptions, or expansionary fiscal policy from Washington. If inflation surprises to the upside and the Federal Reserve responds by raising rates, longer-duration bond funds could lose significant value, while VTIP’s short maturities limit that damage.How to decide which of these three defensive ETFs fits youEach of these funds solves a different problem, and the right choice depends on your time horizon, your risk tolerance, and the specific threat that concerns you most.A practical framework for choosing:If your primary fear is broad stock market drawdowns and you want to remain fully invested in equities, USMV offers the simplest and cheapest solution at 0.15% annuallyIf you are approaching retirement and cannot afford a 20%-plus loss in any single quarter, HELO’s options overlay provides a defined floor under most market conditionsIf your main concern is that inflation will erode your purchasing power faster than your bonds can compensate, VTIP directly hedges that specific risk at just 0.03%If you want layered defense across multiple threats, a combination of all three addresses drawdown risk, tail risk, and inflation risk simultaneouslyNone of these funds will outperform a pure S&P 500 index fund in a strong bull market, and you should not expect them to do so going forward. The goal of defensive positioning is not to maximize your returns but to keep you invested during the periods when most people panic, sell at the bottom, and lock in permanent losses. “Playing defense doesn’t have to mean moving to the sidelines,” Morningstar analyst Zachary Evens wrote.Related: Mutual funds taxed investors on losses, but ETFs barely owed a dime