Worried about a bear market? 3 reasons to buy ZLB like there is no tomorrow

I don’t believe in timing the market, but moments like these should make every investor reassess their risk tolerance. That doesn’t mean you have to sell everything and stash away cash.

A better solution is to take a more thoughtful approach to your stock exposure through a fund built for stability BMO Canadian Stock ETF with Low Volatility (TSX:ZLB).

Here are three reasons why I think this defensive-minded exchange-traded fund (ETF) deserves a place in the portfolios of lower-risk or older investors.

Fluctuates less than the market

ZLB is designed to move less than the overall market. It is built using a rules-based methodology that selects large-cap Canadian stocks with lower beta: a measure of how sensitive a stock is to market movements. The S&P/TSX 60 Index has a beta of one, meaning it moves in line with the market. Stocks with a beta below one tend to fluctuate less, allowing them to perform more smoothly during market rises and falls.

The ETF’s underlying portfolio is rebalanced each May and rebalanced each November, ensuring the portfolio of lower volatility names is maintained as market conditions evolve. Over time, this process has allowed ZLB to realize smaller declines during market corrections, while still capturing much of the upside during recoveries.

More defensive sectors

Unlike the broader S&P/TSX Composite Index, which is heavily skewed towards financials and energy, ZLB is more heavily allocated to consumer staples and utilities. These are known as defensive sectors because demand for their products and services does not fluctuate much with the economy, unlike technology or consumer durables.

Consumers continue to buy household goods and groceries and pay electricity bills, regardless of whether markets are booming or shrinking. That inelastic demand helps support profits and dividends even as cyclical sectors – such as energy or materials – struggle. As a result, ZLB’s sector mix naturally dampens volatility.

Automated management

You don’t have to research low-beta stocks or select defensive sectors yourself; ZLB automates all that for you. The ETF’s methodology performs the screening, weighting and rebalancing automatically, providing a low-risk, ready-made portfolio in one holding.

It’s also reasonably priced, with a management expense ratio (MER) of 0.39%, or $39 per $10,000 invested annually. Those costs cover a fully managed strategy with proven results.

With $5.3 billion in assets and a 2% yield, ZLB remains one of Canada’s most popular ETFs for investors looking for stability and income without sacrificing long-term growth potential.