The BMO Low Volatility Canadian Equity ETF (TSX:ZLB) is an interesting low-beta approach that helps offset the higher levels of volatility that may arise.
Investors were treated harshly. There is no doubt that bonds are close to the level where they have been the least returnable they have ever had, and stock valuations leave much to be desired in terms of value. It’s true that there is a dawn of value everywhere, but for most retired passive investors, there is no single asset class that can help one thrive. In fact, inflation poses a huge threat to many of our investment funds.
Every year, inflation falls by one percent. Last year, it eroded a record number of people who were not around during the inflationary period of the 1970s. There is no doubt that inflation has been dormant for a long time, occasionally appearing briefly after a crisis. This time, the Fed may be wrong to be too dovish, paving the way for higher inflation that could last for years.
Volatility is not going away – at least not anytime soon, it seems
You can’t blame Chairman Powell for this, though. The COVID pandemic has been a difficult beast to deal with. There is no doubt that if it weren’t for Powell’s ability to respond to disasters, an economic depression or a prolonged recession might have hit. Now, we are all dealing with the aftermath. Until the Fed can raise interest rates at least a few times (there will be 3 in 2022), we will have to put up with these terrible price increases.
Instead of worrying about what other investors are already worried about, try to be on the other side of the trade. It undoubtedly paid off hugely in late 2020, when energy and financials bottomed out and higher, setting the stage for an epic rally that continues to this day. Meanwhile, hot tech deals deteriorated, with those chasing the hottest names losing the most.
In this article, we’ll take a look at an interesting ETF that holds many low-beta stocks to help investors beat inflation and persistent levels of inflation in 2022 and beyond.
Without further ado, consider the BMO Low Volatility Canadian Equity ETF (TSX:ZLB).
Fight volatility with very cheap low beta dividend stocks
ZLB is designed to expose Canadian investors to some of the least relevant but very investable names in the Canadian market. Additionally, it is more diversified across various sectors compared to the broader TSX index, and given its increased holdings in the energy and financial sectors, I think it’s a questionable investment at best.
What is there to love about ZLB? Highly diversified, less correlated with the stock market, dividend growth but still returns, and overall value. You see, many of the names in ZLB are not the names you can find on market capitalization-weighted Canadian mutual funds or index ETFs.
What’s in an ETF?
Think of names like Hydro One or Metro, two very defensive high-yield stocks that tend to twist and turn when the market is volatile. After a solid year, ZLB yields at 2.5%, which is quite attractive. With a low MER of 0.39%, ZLB is arguably one of the best and fastest ways to be more defensive in your portfolio. In 2022, value, low beta, and solid defenses could be the key to outperforming the TSX or S&P 500. And ZLB is a great way to achieve this.