One way for investors to diversify and minimize their risk from market-related factors is to buy shares of an exchange-traded fund (ETF).
The BMO Equal Weight REITs Index ETF (TSX:ZRE) could be one such option. Holding real estate investment trusts (REITs) makes the ETF a bit safer than other funds that have a broader cross-section of the markets.
REITs benefit from a lot of recurring income and that can make them very stable at a time when the markets aren’t. Unless businesses start closing up shop, there’s going to be a need for them to have a place to operate out of. And even then, leases give REITs some predictability and advance warning to mitigate the potential that they lose a big tenant.
While they’re stable, REITs don’t offer significant returns, either.
But one of the main reasons to invest in REITs is benefit from their stability as well as their dividends. The BMO Equal Weight REITs pays a dividend of more than 4% per year and can be a great source of recurring income.
The fund makes payments on a monthly basis, more often than the quarterly payouts investors will get with most other dividend stocks.
The ETF’s average holding has a price-to-earnings ratio of just 11 and a price-to-book multiple of about 1.2 The low multiples make the stocks less likely to suffer significant corrections in the event of a market crash. While they’re not immune, the risk is certainly lower.
That’s why the BMO Equal Weight REITs can be a solid choice for long-term investors who don’t want to take on much risk.
