There are thousands of investors out there who just can’t bear to put any of their savings to work investing in the stock market. They’re paralyzed with fear that their capital will disappear into a puff of smoke.
This is unlikely to happen, of course. If the stock market goes to zero, we’ve got bigger problems on our hands than just losing money. But a decline of 20%, 30%, or even 50% is quite possible. Risk-adverse folks want nothing to do with any asset that could potentially decline that much.
Fortunately, there’s a solution. Low volatility ETFs allow an investor to invest in the most boring parts of the stock market.
BMO has two low volatility ETFs. The first is the BMO Low Volatility Canadian Equity ETF (TSX:ZLB), while the second is the BMO Low Volatility U.S. Equity ETF (TSX:ZLU).
The Canadian version of the ETF has just over $1 billion in assets and trades over 150,000 shares per day. It has a trailing yield of 2.3% and a reasonable management expense ratio of 0.39%.
Top holdings include Fairfax Financial Holdings, Canadian REIT, and Waste Connections. It has a total of 46 different stocks and Google Finance gives it a beta of 0.33. This indicates it’s only 33% as volatile as the market.
The U.S. version is slightly smaller and only offers a 1.9% trailing yield. It has a slightly smaller management expense ratio.
Top holdings include McDonald’s Corp, AT&T, and Republic Services. It has 103 different holdings and lives up to its name, offering a beta of just 0.21, meaning it’s just 21% as volatile as the market.
