Stocks that have low volatility don’t move as wildly as the broader markets. Example of these types of investments are healthcare stocks, defensive stocks, and utility stocks. Their underlying businesses provide customers with essential products and services that will always be needed, whether there’s a recession or rapidly growing inflation.
An exchange-traded fund (ETF) that gives you exposure to these types of stable investments is the BMO Low Volatility US Equity ETF (TSX:ZLU). It invests primarily in U.S. stocks, ones which aren’t sensitive to the market. More than 21% of the fund’s holdings are in consumer staples, followed by 20% in utilities, 15% in healthcare, just under 12% in financials, and 10% in consumer discretionary. It also invests in other sectors, but there’s no other one that accounts for 10%.
As for the holdings themselves, there are 102 of them in the fund. The largest holding, Campbell Soup (NYSE:CPB), accounts for just 1.58% of the fund’s total weight. Dollar General (NYSE:DG) and Domino’s Pizza (NYSE:DPZ) round out the top three.
The fund’s management expense ratio of 0.33% is modest compared to other ETFs, providing investors with some good value for some excellent diversification.
Year to date, the ETF has been fairly stable, declining by less than 2% in value, which is better than the TSX’s fall of more than 10% this year. The fund also yields 1.9% and can provide investors with some solid recurring cash flow.
This ETF is a great option for investors who want some stability at a time when there isn’t much of it in the markets.