3 Stock ETFs That Let you Sleep at Night — and Still Make Money

With highly diversified index ETFs like the iShares S&P/TSX Capped Composite Index Fund (TSX:XIC), you can sleep well but still make money.

This week witnessed significant stock market volatility, as popular tech stocks stumbled. Stocks that had been popular on Twitter bore the brunt of the selloff, which seems to have been based on valuation concerns. Since then, many of the stocks that stumbled in the past week have recovered. Wednesday saw a major rally after a weak market open. Still, many investors are now looking for safer places to put their money. If that sounds like you, read on. In this article I’ll explore three ‘safe’ ETFs that let you sleep at night while still making money.

The Vanguard S&P 500 Index Fund

The Vanguard S&P 500 Index Fund (TSX: VFV)(NYSE:VOO) is one of the world’s most popular index funds. It’s based on the S&P 500–the 500 largest companies in America by market cap. VOO is listed in both the U.S. and Canada. The Canadian version–VFV–can be bought without currency conversion costs. Conversely, the U.S. version has a lower fee. Regardless of which version you buy, you’re getting an ultra-diversified portfolio of 500 stocks in exchange for a miniscule fee–0.04% for the U.S. version, 0.08% for the Canadian version.

This fund is ultra diversified and has delivered solid total returns over the last 10 years. One thing it doesn’t have is a high dividend yield–but don’t worry, the next ETF on this list has yield a-plenty.

The iShares S&P/TSX 60 Index Fund

The iShares S&P/TSX 60 Index Fund (TSX: XIU) is a BlackRock index fund based on the largest 60 public companies in Canada. It isn’t quite as diversified as VOO, nor does it have such high returns. What it does have, though, is a respectable dividend yield. According to BlackRock, the fund yields 2.87%. After fees, you’ll get about 2.6%. That means you’d get $2,600 back annually on a $100,000 position.

That’s a pretty decent income supplement right there. And the best part is, you do not need to take on extreme risk in order to get it. XIU also has a fairly low fee of 0.18%, which is not high, but is higher than VFV’s fee.

The iShares S&P/TSX Capped Composite Index Fund

The iShares S&P/TSX Capped Composite Index Fund (TSX: XIC) is another index ETF built on Canadian markets. In this case, it goes off the S&P/TSX Capped Composite Index rather than the TSX 60. That means you get more diversification with this fund than with XIU. Overall, XIU has delivered slightly better total returns than XIC over the last five years. However, with its added diversification, XIC should theoretically be less risky. It also has a much lower fee than XIU, at just 0.06%. Overall, this is a great Canadian index fund to buy and hold.

Foolish takeaway

Lately, we’ve been seeing significant volatility in the markets. And we’ll probably continue to see it for the foreseeable future. There’s never a sure thing in life, and that’s even truer of the stock market than with most things. But that doesn’t mean you have to gamble. With any of the three funds above, you can enjoy guaranteed market-average returns without taking on undue risk. For defensive investors, they are all worthy picks.

Fool contributor Andrew Button owns shares of iSHARES SP TSX 60 INDEX FUND and Vanguard S&P 500 ETF. Tom Gardner owns shares of Twitter. The Motley Fool owns shares of and recommends Twitter. The Motley Fool owns shares of Vanguard S&P 500 ETF.

More on Dividend Stocks

Piggy bank wrapped in Christmas string lights
Dividend Stocks

The $7,000 TFSA Move Most Canadians Leave Until December

An earlier TFSA contribution can simplify your plan, even when the immediate tax saving is smaller than you expect.

Read more »

diversification is an important part of building a stable portfolio
Dividend Stocks

Diversification 101: How Beginners Can Protect Against Market Shocks

Stocks like TD Bank and Fortis provide an anchor to a well-diversified portfolio for resilient long-term performance.

Read more »

man makes the timeout gesture with his hands
Dividend Stocks

Why Dividend Cuts Happen and How to Spot the Warning Signs

Learn why dividend cuts happen and how to spot warning signs, using BCE and TELUS to examine cash flow, debt,…

Read more »

woman stares at chocolate layer cake
Dividend Stocks

Just Turned 50 With Little Saved? Here’s Where to Start

This investing strategy can reduce risk while still delivering decent yield.

Read more »

Trans Alaska Pipeline with Autumn Colors
Dividend Stocks

1 Top Canadian Dividend Stock Down 17% to Consider Now for Lifelong Income

This company has increased the dividend annually for more than three decades.

Read more »

Senior uses a laptop computer
Dividend Stocks

A 4.9% Dividend Stock I Plan to Hold Long Term: What $5,000 Would Collect

This is a solid utility stock to consider on dips for a long-term portfolio with a focus on growing income.

Read more »

shopper carries paper bags with purchases
Dividend Stocks

Your GIC Pays 3% to 4%: This TSX Stock Pays You Every Month Instead

SmartCentres pays more income than an illustrative GIC, but a modest unit-price decline could erase the first-year advantage.

Read more »

the word REIT is an acronym for real estate investment trust
Dividend Stocks

REIT Investing: I’m holding SmartCentres for its 98.1% Occupancy

SmartCentres’ fundamentals remain solid. Besides high occupancy, rental growth and a high-quality tenant base are positives.

Read more »