1 of the Best Canadian ETFs to Buy Through a Choppy January

BMO Canadian Dividend ETF (TSX:ZDV) looks like a great Canadian ETF to help you fight inflation and volatility in 2022.

| More on:
exchange traded funds

Image source: Getty Images

Arguably, young investors may wish to fight inflation with a sizeable equity position, rather than seeking to avoid market volatility and settle for a 4-6% inflation that’s akin to a “saver’s tax.” Indeed, cash and GICs (Guaranteed Investment Certificates) are guaranteed not to go down in dollar amounts.

At the same time, they’re also guaranteed to make you lose ground to inflation. While “surrendering” to inflation with guaranteed investments may make sense with a portion of your wealth, investors must proactively take steps to overcome inflation if they’re to continue moving forward en route to a comfortable retirement.

Navigating through choppy waters in January 2022

As a younger investor, I’d argue the risk of being caught offside with too much cash in the face of inflation is higher than being caught on the receiving end of a market selloff. Of course, there are ways to get the best of both worlds.

A middle ground does exist where investors can face a bit less volatility than where the selling is concentrated (the tech sector these days) while being able to help investors achieve a return that can outpace inflation. In an age where markets are choppy, with low prospective returns and elevated inflation, it’s so much harder to obtain real returns (that’s returns after inflation). Indeed, you can chase the falling knives on the way down if you’re a venturesome youngster with disposable income, but for everyone else, there are ways to make money that don’t require you to lose sleep!

Whether or not this market correction extends into February is anyone’s guess. Odds are, it will. As such, it’s vital to remain diversified and spread your bets, so you’re not facing the brunt should this correction continue or intensify to become a bear market.

The ZDV: High dividend, low volatility, decent growth, and a fair fee

Enter BMO Canadian Dividend ETF (TSX:ZDV), a diversified basket of high-yield Canadian dividend stocks. The yield currently sits shy of 4%, with a modest MER of 0.39%. The ETF has been a mainstay for investors seeking dividends and long-term appreciation. The ETF is marketed as having a benefit of lower volatility than the market. With a big chunk of Canadian banks, telecoms, and other plays, the ZDV is arguably one of the best ways to bet on the Canadian stock market. And a certainly more diversified investment than your run-of-the-mill TSX Index fund, which is overweight financials and energy.

Though the ZDV is likely to be less volatile than the choppiest parts of the market, there’s no guarantee the fund will hold its own in the event of a cash-crunching market crash. Indeed, any such amplified pain will be undeserved, so investors must ensure a long-term time horizon before placing a bet in the ETF, or any investment, for that matter!

Remember, volatility doesn’t have to be painful. If you’ve got a 10-year horizon, it may bring forth opportunities.

Bottom line

It’s a volatile start to the year. Who knows how much further this market has to fall? In any case, investors need not fear this “healthy” correction. It’s easy to forget that 10% drawdowns happen as a part of a healthy bull run. As shares of your favourite stocks and ETFs sag, be ready to buy as you look to fight volatility and inflation at the same time.

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. The Motley Fool has no position in any of the stocks mentioned.

More on Investing

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Earn $2,000 in Passive Income in 2025 With Less Than $51,000 in Savings

You can invest in Canadian high yield stocks via the Vanguard FTSE Canadian High Yield Dividend ETF (TSX:VDY).

Read more »

Asset Management
Investing

Where Will Restaurant Brands International Stock Be in 1/3/5 Years?

Let's dive into where Restaurant Brands (TSX:QSR) could be headed over the near to medium term, shall we?

Read more »

profit rises over time
Tech Stocks

4 Reasons to Buy Constellation Software Stock Like There’s No Tomorrow

Constellation Software stock continued its climb upwards after recent earnings, and this only adds to its appeal.

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

Is Enbridge Stock a Good Buy?

Enbridge provides a 6.5% dividend yield right now.

Read more »

calculate and analyze stock
Bank Stocks

Is National Bank of Canada Stock a Buy for its 3.3% Dividend Yield?

While National Bank stock might seem to have a lower dividend yield, its upside could offer a valuable way to…

Read more »

An investor uses a tablet
Investing

4 Value Stocks That Are Must Buys for Canadians in November

Whether you want to add growth or defence to your portfolio, these four stocks are some of the best Canadian…

Read more »

Oil industry worker works in oilfield
Energy Stocks

Is Suncor Stock a Buy, Sell, or Hold for 2025?

Suncor stock looks undervalued as the company continues to increases cash flows, earnings, and shareholder returns.

Read more »

monthly desk calendar
Dividend Stocks

This 7.8% Dividend Stock Pays Out Every Month

Not all monthly dividend stocks are created equal. And this top stock is certainly a strong choice for passive income.

Read more »