Beginner Investors: How to Retire Wealthy

Instead of timing the markets, beginners should focus on staying invested with one-stop-shop securities like BMO Canadian High Dividend Covered Call ETF (TSX:ZWC).

| More on:

Depending on which financial TV show you’re tuned into, you’ve probably heard some pretty bearish commentary from so-called pundits and economists that claim to know where the markets are headed next.

There are quite a few things to be worried about as an investor: the inverted yield curve, escalating trade tensions between the U.S. and China, hawkish commentary from the Fed, the Iran situation, a softening Canadian economy, Trump’s market-moving tweets, Justin Trudeau’s brown-face scandal and its potential implications going into the election, the Hong Kong protests, the Brexit ordeal, and so many more that I won’t touch on in this piece.

Yes, there are plenty of uncertainties, but that’s what investing is all about!

My goal is not to scare you out of the markets by listing a handful of items that have investors most worried. Rather, I want to remind investors that the more uncertainty there is, the more volatility, which means a less efficient stock market, leaving room for DIY stock pickers like you and me to beat the market.

While recession fears are high, the TSX continues to flirt with all-time highs, and it’ll be the buyers on terror that’ll come out on top once market sentiment suddenly reverses. In spite of all the uncertainties, the market remains robust. In a way, the markets want to roar higher but will need a push over the top.

While others focus solely on the negatives, like a potential earnings slowdown, and all the sort, it’s the unexpected positives that could cause an unexpected market melt-up. And if you made a rash decision based on excessive negativity, you’re going to miss out and likely have to buy back your stocks at much higher prices down the road.

As someone wise once said, successful investing isn’t about timing the market; it’s about time in the market. Nobody knows where we’re headed next, and while it’s tempting for beginner investors to try to outsmart Wall Street, acting on emotion seldom yields the desired results.

The best thing a newbie could do today is to tune out of the short-term-focused noise and focus on what truly matters: individual portfolios and discovering mispriced stocks.

If you want a properly balanced portfolio that considers the bull and bear sides of the coin, consider a covered call ETF like BMO Canadian High Dividend Covered Call ETF (TSX:ZWC), a basket of high-yield Canadian stocks with an impressive 6.4% distribution yield.

Through dynamic writing of covered call options, the ZWC is able to provide investors with a distribution yield that’s larger than the sum of its constituents. The managers running the product screen the TSX for securities that possess above-average dividend growth, sustainability, and option liquidity, making for a stellar risk-parity investment with better-than-average downside protection without sacrificing much on the total returns (dividends + capital gains) front.

The ETF primarily consists of Canadian banks, insurers, pipeline plays, telecoms, and utilities, all of which have large, sustainable payouts. To give the distribution a boost, the covered call strategy trades off upside potential for premium income upfront, an excellent hedge in a market that’s unsure of where it’s headed next.

Foolish takeaway

As a new investor, your primary goal should be to stay invested and not scare yourself out of the markets by paying too much merit to shallow short-term market projections. Stick with a quality ETF like the ZWC.

Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned.

More on Stocks for Beginners

data analyze research
Stocks for Beginners

Top Canadian Stocks to Buy With $5,000 in 2025

Got $5,000 that you want to invest in some long-term stock holdings? These Canadian stocks could be the ideal fit…

Read more »

how to save money
Stocks for Beginners

Canada’s Biggest Winners in 2025? My Money’s on These 2 TSX Stocks

Here’s why I’m betting on these TSX stocks to be among Canada’s biggest winners in 2025.

Read more »

A plant grows from coins.
Stocks for Beginners

1 Canadian Stock Ready to Surge In 2025

First Quantum stock is one Canadian stock investors should seriously consider going into 2025, and hold on for life!

Read more »

Concept of multiple streams of income
Stocks for Beginners

The Smartest Dividend Stocks to Buy With $500 Right Now

The market is flush with great opportunities right now, and that includes some of the smartest dividend stocks every portfolio…

Read more »

customer uses bank ATM
Stocks for Beginners

A Dividend Giant I’d Buy Over TD Stock Right Now

While TD Bank recovers from a turbulent year, this dividend payer with a decent yield and lower payout ratio is…

Read more »

Start line on the highway
Stocks for Beginners

The Best Canadian Stocks to Buy and Hold Forever in a TFSA

Do you want some of the best Canadian stocks to buy? Here are three stellar options to kickstart your long-term…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Stocks for Beginners

Maximizing Returns Within Your 2025 TFSA Contribution Room

Maximize your 2025 TFSA contribution room by contributing the max amount and investing in solid stocks for the long term.

Read more »

coins jump into piggy bank
Dividend Stocks

A 10% Dividend Stock Paying Out Consistent Cash

This 10% dividend stock is one strong option for long-term income, but make sure you get a whole entire picture…

Read more »