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The asset growth of the global exchange-traded fund (ETF) industry, to US$10 trillion in 2021, is proof that many investors are beginning to see the benefits of ETF investing. You can no longer deny that ETFs can be safe harbours, if not portfolio anchors.
Mark Raes, Head of Product at BMO Global Asset Management Canada, says ETFs proved their value during the tumultuous year. He adds the asset class provides efficient access and liquidity across both broad and precise exposures. It also enables risk-averse investors to balance the stops and starts of the continued COVID-19 pandemic, Raes said.
If you want to be part of the growing trend, three ETFs on the TSX stand out. Besides instant diversification, the trio boast strong equity market returns. BMO Low Volatility Canadian Equity ETF (TSX:ZLB), BMO Equal Weight Oil & Gas Index ETF (TSX:ZEO), and Vanguard FTSE Canada All Cap Index ETF (TSX:VCN) can ride out the market’s ups and downs, and are excellent options for the long term.
BMO’s prominent ETFs
BMO Asset Management is both an investment fund manager and a portfolio manager. BMO Low Volatility Canadian Equity ETF and BMO Equal Weight Oil & Gas Index ETF are two of its prominent ETFs today. The former provides exposure to diversified Canadian equities, while the latter has a basket of Canadian oil & gas equities.
ZLB offers growth solutions, although the portfolio strategy is unique. The focus or concentration is on a low-beta weighted portfolio of Canadian equities or stocks with lower volatility than the market. Also, the risk-rating category is low to medium. The number of holdings as of this writing is 48.
There are nine holdings at present with Cenovus Energy (15.27%) and Imperial Oil (13.55%) having the highest weight. Performance-wise, both ETFs are steady performers. In the last 3.01 years, ZEB and ZEO have a total return of 39.16% (11.62% CAGR) and 45.41% (13.27% CAGR), respectively.
Exposure to a broad Canadian index
Vanguard FTSE Canada All Cap Index ETF tracks the performance of a broad Canadian equity index. The holdings could be in small, mid, and large-cap stocks. The fund’s allocation skews toward the financials (33.7%) and energy (13.2%) sectors. VCN has 181 holdings with total net assets of $3.99 billion.
The growing number of ETF providers indicates a maturing industry. Today, most strategic investors include ETFs during portfolio construction to lessen market risks.