Rising inflation is the usual headline these days and the major worry of Canadians. However, BNN Bloomberg data shows that, historically, the Toronto Stock Exchange climbs with inflation. However, with the prevailing uncertainties, investors should remain risk averse and find other alternatives to build wealth.
Exchange-traded funds (ETFs) should do well in an inflationary period, although the choice of ETF is crucial to investing success. The primary advantage of ETF investing is that you limit your risk at the onset, because you invest in a basket with several stocks in it.
Big Six banks
BMO Equal Weight Banks Index ETF is a superb choice, because the industry is banking, and the holdings are Canada’s Big Six banks. ZEB’s strategy is to replicate the Solactive Equal Weight Canada Banks Index’s performance. Apart from the growth solutions and exposure to top Canadian lenders, the fund maintains equal weight in each security to lessen specific risk.
Grade A+ ETF
Horizons S&P/TSX 60 Index ETF replicates the S&P/TSX 60 Index’s performance. Horizons measures the performance of the large-cap market segment of the Canada’s equity market. HXT is a stable ETF, given its 52.65% (15.08% CAGR) in the last three years.
Steve Hawkins, Horizon ETF’s president and CEO, said, “As our list of ETFs with established track records continues to grow, they are earning an increasing amount of recognition for excellence in their respective Fundata categories, and we hope this trend will continue.” HXT belongs to the Canadian Equity category.
Long-term core holding
Currently, this ETF has 241 holdings with the exposure leaning more towards the financial (33.63%) and energy (15.01%) sectors. The top holdings with at least 4% weight are Royal Bank of Canada, Toronto Dominion Bank, and Shopify. Like ZEB and HXT, XIC has a respectable performance in the last three years (+49.41%/14.28% CAGR).
Gaining ground
ETFs are gaining ground and attracting risk-averse investors. The names in focus are among the best choices if you want to limit the risks through diversification.