BMO Low Volatility US Equity ETF (ZLU.TO)

Beta is market risk. The market has a beta of 1.0. ZLU-T has been designed to have lower market volatility. It does not participate necessarily in strong increases in the marketplace. It can, however, sometimes outperform a bull market. The healthcare sector has recently caused it to outperform.

These products are promoted as not having as much upside in a bull market, but will limit the downside if the market turns negative. He tends to not use low volatility products, but he is starting to reconsider his position. This is a value proposition that is worth exploring, especially if you would find comfort in any kind of a potential of a downturn.

These are companies that are low and steady. There are about 100 securities in this and it is very diversified. He compared the performance of this with the S&P, and has found that it has outperformed it. One of the concerns he has about getting too close to the big cap US stocks, is that a lot of the internationals are not doing that well. Dividend yield of 1.29%.

Has done very well, but you have to think about the US dollar being high and expect more and more companies to have earnings disappointments. Forget currency hedging.

It makes a lot of sense to have this in every portfolio. You can’t go wrong here. Great product.

If you believe that oil is on sale, is there an ETF, US or Canadian, that has been beaten down worse than the others, and is this an opportunity? There are a couple that you could look at. iShares S&P/TSX Capped Energy (XEG-T) and BMO S&P/TSX Oil and Gas (ZEO-T). These are very similar, so either one. On the other hand, you could go into the US and pick up this one, which has not been slaughtered quite as badly as the Canadian stuff.

ETF Cdn$ Hedged, low volatility with US based companies? Both iShares (iShares MSCI Cdn Min Volatility (XMV-T)) and Bank of Montréal (BMO Low Volatility US (ZLU-T)) have them. For someone shy of volatility, either of these are very good choices.

Low beta ETF. These ETFs have been all the rage and have been fantastic in difficult markets. Things are changing right now. Thinks they should come out with high volatility ETFs. Everyone should have one low volatility ETF. There’s a place for this. These are defensive if market turns down.

His general view on low volatility ETFs is that most people don’t need them. If you are a young person who can handle market levels of volatility, you don’t need this. This was designed for people who want to get exposed to the stock market, but don’t think they could stomach the roller coaster of a ride if they think the market is going to be particularly volatile.

Trading volume is very low and sometimes nil. Should I be concerned? Most people these days are not concerned about low volatility but if volatility returned, a low volatility product would work well. Most people, including himself, are comfortable with where they are in the US market right now. You should be fine.