With uncertainty continuing to persist in the markets and more potential tariffs on the way, it’s natural for investors to want to be cautious in this environment. It’s always important to be selective about where you put your money, but in this economic landscape it is arguably more important than ever to pick investments that can help protect your money, which is why ETFs could be a great option.
You don’t want to necessarily keep your money on the sidelines and try to time the market. Instead, finding lower-risk investments that help you minimize risk is the best bet, which is why high-quality ETFs could be perfect for cautious investors.
Not only do ETFs offer instant diversification by allowing investors to gain exposure to dozens of stocks simultaneously, but the best funds in Canada also have proven track records of performance and reliability.
And while there are hundreds of ETFs trading on the TSX, only a select few are truly ideal for risk-averse investors.
So, if you’re looking to earn passive income, reduce volatility, and grow your money over the long haul, here are two low-stress ETFs to consider adding to your portfolio today.
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A low-risk ETF offering a yield of 5.4%
In this environment, not only do you want to buy an ETF to help mitigate against volatility, but finding a fund that can offer you a significant dividend yield can be ideal too.
Earning a significant yield can not only help your capital to compound at an even faster rate, but during periods of higher volatility when the market moves sideways or even lower for a prolonged period, the income you earn from dividends may be the only returns you see.
That’s why one of the best ETFs to buy now is the iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI).
The XEI ETF holds a diversified basket of high-dividend-paying Canadian stocks and provides investors with monthly income in addition to long-term capital gains potential.
Blue chips
What really makes the XEI particularly appealing for cautious investors, though, is the quality of its holdings. Its portfolio includes some of the most established and reliable businesses in the country, such as banks, utility stocks, telecoms, and pipelines. These sectors are known for their consistent earnings and lower volatility, especially during periods of economic uncertainty.
In fact, its three largest holdings are Toronto-Dominion Bank, Suncor, and Enbridge.
Therefore, by spreading exposure across a broad range of blue-chip Canadian stocks, the XEI ETF helps to protect your portfolio from individual company performance while still generating a strong yield.
Furthermore, with a dividend yield of roughly 5.4%, and a low management fee of just 0.22%, the XEI is also a cost-effective way to get exposure to a high-quality basket of Canadian dividend stocks without needing to do a tonne of research and pick each company individually.
So if you’re being cautious in this environment, but still want to keep your money invested and earn monthly income, there’s no question that the XEI is one of the best ETFs to buy now.
One of the best funds Canadian investors can buy
In addition to XEI, another excellent option worth considering by investors who want exposure to some of the best and largest blue-chip stocks in Canada is the iShares S&P/TSX 60 Index ETF (TSX:XIU).
The XIU ETF is one of the oldest and most established ETFs in Canada. It tracks the S&P/TSX 60 Index, which includes 60 of the largest and most liquid companies on the TSX.
These are blue-chip businesses with proven track records, strong balance sheets, and dominant market positions in their respective industries.
Furthermore, because the fund is made up of the top large-cap stocks in Canada, it tends to be more stable than broader-market ETFs.
The XIU ETF offers investors exposure to the strongest names in Canadian business, such as banks, railways, energy infrastructure, telecoms, and more.
In fact, three of its top five holdings are Royal Bank of Canada, Shopify and Brookfield, and the fund offers a dividend yield of roughly 3%, with a management expense ratio of less than 0.2%.
So if you’re looking to try to mitigate volatility in this highly uncertain environment, the XIU is one of the best ETFs to buy now.
