Big Monthly Income for Life: 2 Stellar Bank of Montreal ETFs to Protect Your Wealth

BMO Equal Weight REITs Index ETF (TSX:ZRE) and one other Bank of Montreal ETF will help you survive and profit in a bear market.

| More on:
The Motley Fool

Don’t assume that just because 2018 is in the rear-view mirror that the days of extreme volatility are over with. The turbulent times could very well carry on into the first few months of 2019. So, if you’ve been actively buying cyclical growth stocks on the recent post-Christmas bounce, you may be left disappointed should the bear regain control of this shaky market that’s been rattled by macro fears and geopolitical uncertainties.

The recent sell-off has undoubtedly been led by high-multiple growth names, and with no reason to expect any less of the same in the first few months of the new year, investors may find it more prudent to pick up defensive dividend securities.

As the Fed continues tightening, we’re bound to see multiple compressions, and with a less-certain earnings trajectory for many richly valued stocks, the only thing that we can rely on are the dividend payments. If you’re going to endure turbulent times, you might as well have something material to show for it, and with the two securities I’m about to present to you, you’ll get just that.

Without further ado, here are two monthly distribution-paying Bank of Montreal ETFs that’ll have your back in a bear market.

BMO Equal Weight REITs Index ETF (TSX:ZRE)

Real estate is a must-have for any portfolio that intends to weather the potentially violent volatility storm on the horizon. As an alternative asset class that has a lower correlation to equities, defensive investors seeking to tilt the risk/reward in their favour would be doing themselves a massive favour by diversifying into real estate investment trusts (REITs) if they haven’t done so already.

While many fear a housing meltdown could bring forth severe capital losses, investors will be comforted by large distribution payments that will continue flowing in. And if no recession or housing meltdown happens, REITs are a perfect way to lessen the damage your portfolio will endure as triple-digit market movements become the norm.

At the time of writing, the ZRE is down 9% from its high and now sports a 5% yield. The equal weighting of the ETF’s constituents allows many advantages over traditional market-cap-weighted indices; most notably, they, on average, allow for superior results over the long haul, as they’re more exposed to smaller, potentially cheaper REITs that are capable of more growth.

BMO Low Volatility CAD Equity ETF (TSX:ZLB)

As the market waters get rough, you’re going to want to lower your portfolio’s correlation to the moves made in the broader market. In simple terms, you’re going to want to make sure your portfolio’s beta is less than one, so your portfolio’s day-to-day moves will be less choppy.

The ZLB is one of my favourite BMO ETFs for risk-parity portfolios designed with downside protection in mind. Further, I’m a huge fan of the “smart beta” strategy and the low 0.4% MER that I think is a bargain given the expertise you’re getting.

“The ZLB’s strategy isn’t merely to screen out the lowest-beta TSX stocks. Rather, there are smart humans behind the scenes that are hand-picking the securities of businesses that have solid fundamentals. We’re talking about proven winners with robust cash flow streams, and plenty of growth left in the tank.” I said in a previous piece. “ beta goes above and beyond just the beta, although the metric is the ‘main attraction’ to the low-volatility investment strategy.”

At the time of writing, the ZLB is down 7.5% from the top compared to the S&P 500, which is off around 15% from peak levels. While the ZLB could still decline sharply, the moves will be less violent, and the damage endured will be significantly less than the broader indices.

Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette owns shares of BMO Low Volatility CAD Equity ETF.

More on Dividend Stocks

money cash dividends
Dividend Stocks

The 2 Stocks Every Dividend Investor Should Own for Reliable Cash

Dividend stocks offering consistent and reliable returns can be a crucial asset in any portfolio, especially for income-producing dividend portfolios.

Read more »

grow dividends
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX dividend-growth stocks now offer yields above 7%.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

Building a large, tax-free nest egg in your TFSA with growth stocks can give you more control over your tax…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Dividend Stocks

May Boycotts: Is Loblaw Stock in Trouble?

Even extreme fluctuations in consumer purchasing patterns may not impact a stock as aggressively as demoralizing actions like boycotts.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Want $2,000 in Annual Dividends? Invest $27,000 in These 3 Stocks

These three top dividend stocks could help earn a stable passive income.

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Absurdly Cheap Stocks to Buy and Hold for Years

Looking for some great stocks to buy for long-term growth? Here are three absurdly cheap stocks that are impossible to…

Read more »

Canadian Dollars
Dividend Stocks

Earn $100 Monthly With a Simple $17,025.75 Investment

A less than $20,000 investment in a high-yield energy stock can produce $100 every month.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

Innergex Cut its Dividend: Is the Stock Still a Buy?

While a dividend cut is bad news for existing investors, it may present a good buying opportunity for new investors.

Read more »