If you’re an investor who doesn’t know which stock(s) to invest in, the Vanguard FTSE Canadian High Yield Index ETF (TSX:VDY) could be an attractive option. Year to date, the stock has risen 17.3% and with a yield of more than 4.2%, investors have received some good returns from the ETF.
What makes the ETF a fairly safe buy is that about two-thirds of its holding are from the financial services sector. Royal Bank of Canada (TSX:RY)(NYSE:RY), Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS are among the top four holdings in the fund and will definitely provide the fund with a lot of stability.
The next largest sector in the fund is energy at just under 22%. Utilities make up around 7.4% while communication services are 4.3% of the total weight.
With many blue-chip stocks in the fund, investors will essentially be betting on the strength of some of the top Canadian stocks. And with the economy continuing to do well, it could be a good time to invest in the ETF.
Overall, there’s a good cross-section of stocks for investors to hold in this ETF that can make it a very safe hold over the long term. The average price-to-earnings ratio of the holdings is a very reasonable multiple of 12.5 and the price-to-book average is just 1.6. Even if there is a downturn in the markets, fairly valued stocks won’t be overly exposed.
And with a net expense ratio of just 0.20%, management fees aren’t going to put any real dent in your overall earnings.
