2021 was a strong year for the stock market, but it ended in a state of volatility that has bled through to 2022. Just a few weeks into another year of trading, the S&P/TSX Composite Index has started going through another downturn. The Canadian benchmark index is down by 4.49% from its January 17th level at writing.
If you are an investor keen on getting the most bang for your buck, but you’re unsure about which stocks to add to your portfolio, it is nothing to be ashamed of. Allocating your investment capital to a narrow portfolio of stocks could provide you with significant returns if your investments do well but result in losses if the risk doesn’t pay off.
Investing in an exchange-traded fund (ETF) allows you to invest in a single financial instrument while diversifying your capital across a broad group of equity securities to mitigate capital risk.
Today, I will discuss two of the best ETFs you could buy right now to mitigate the risk of individual stocks by diversifying your portfolio between several types of stocks, asset classes, and sectors.
TD Global Technology Leaders Index ETF
TD Global Technology Leaders Index ETF (TSX: TEC) is a fund designed to provide you with investment returns by tracking the performance of the Solactive Global Technology Leaders Index. The Solactive Global Technology Leaders Index focuses on the performance of mid- and large-capitalization stocks worldwide operating in the technology sector.
TD Global TEC ETF invests in and holds stocks in proportion to their weightings in the underlying index. TEC ETF’s top holdings include Apple, Microsoft, and Amazon.com. The fund also provides you with significant growth potential through mid-cap tech stocks. The global tech sector is going through a correction right now, and investing in this ETF could provide you with international exposure to the global tech industry at a bargain.
Vanguard FTSE Canada All Cap Index ETF
Vanguard FTSE Canada All Cap Index ETF (TSX: VCN) is a fund designed to provide you with investment returns by tracking the performance of the FTSE Canada All Cap Domestic Index. The FTSE Canada All Cap Domestic Index invests primarily in small-, mid-, and large-cap Canadian stocks, offering diversified exposure to the Canadian stock market.
The fund diversifies your capital across a broad group of Canadian stocks, investing in 181 publicly traded companies. Vanguard VCN ETF invests in and holds assets in proportion to their weightings in the underlying index.
VCN ETF’s top holdings include Shopify, Royal Bank of Canada, and Toronto-Dominion Bank. Vanguard VCN ETF could be an excellent way to gain exposure to the performance of the entire Canadian stock market in the form of a single investment.
Foolish takeaway
Remember that investing in ETFs can mitigate capital risk by diversifying your investment capital across several securities in the form of a single financial product. However, it does not entirely eliminate the risk. Choosing ETFs that can strike the right balance between value and upside potential can help you make the most of your investment capital.
TD Global TEC ETF and Vanguard VCN ETF could be viable funds you can consider for this purpose.
