Nervous Investors: Buy the BMO Canadian Banks ETF During This Recovery!

The TSX continued its rebound this week, which is why it’s a great time to get on the Big Six banks. But why not get all of them with this stock for nervous investors?

| More on:
A person suffering

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

It’s been seven months — seven long months — of the TSX falling from the highs of last November. Sure, we saw some rebounds during that time, but as of March 29, the market has been in a free fall — that is, until last week.

News that a market correction was official turned investor sentiment positive. After the TSX fell 10.8% from March 29, shares started to turn around. And what’s more, it hasn’t stopped yet.

While this doesn’t mean another fall won’t come, it does mean there is a good reason to buy at these levels. But what if you’re a nervous investor? Don’t worry; I have the stock for you.

Buy the Big Six

The Big Six banks have historically come out of recessions, economic downturns, market correction, even the pandemic to pre-fall levels within a year. That’s why they’ve long been touted as some of the best buys on the TSX, whether you’re a nervous investor or not.

But instead of buying them all separately, you can pick up an exchange-traded fund (ETF) that focuses on them all. And right now, BMO Covered Call Canadian Banks ETF (TSX:ZWB) looks like a strong option.

The ETF seeks to replicate the performance of the Big Six banks by investing in them all. However, it adds some more returns by offering call options. Plus, you also get in on the banks’ dividend yields. The ETF currently yields at 5.31% as of writing.

Why this ETF?

There are a lot of ETFs out there. There are even tonnes offered by this bank in particular. But the reason I like ZWB is because it offers a high dividend yield, while also offering stable returns by investing in the Big Six banks. But the covered call option does allow for slightly more returns than just investing in a Big Six bank ETF.

You may wonder as a nervous investor whether investing solely in the Big Six banks is a good idea. But remember, the banks also invest in other sectors as well. Their sole goal is to make money. And that’s good for you.

Historically, the banks continue to perform well again and again. And that’s over the last decade. Meanwhile, other sectors can’t boast the same, especially sectors like energy and utilities, where there has been a major shift.

Value on value

Now, you can pick up ZWB ETF while it’s on the rebound, but also while it’s still of value. Shares are down 5.4% year to date and almost 10% since March 29, when things went south. Yet that’s starting to change, with shares up 2% in the last week, like many other companies on the TSX today.

So, now is a great time to lock in a dividend yield of 5.31%, get in on shares while they’re still down and look forward to more growth upwards. Again, even if there is another fall, overall, you’ll see your shares rebound to pre-fall prices of around $23.50. That’s an upside of 16% as of writing!

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Bank Stocks

You Should Know This
Bank Stocks

75-Basis-Point Rate Hike? Here’s What it Means for Stocks

Aggressive rate increases dampen investors’ sentiment and send share prices tumbling, because the hikes can impact corporate earnings or profits.

Read more »

You Should Know This
Bank Stocks

TD Bank Stock Faces Challenge From U.S. Senate!

Toronto-Dominion Bank's (TSX:TD)(NYSE:TD) latest deal is being blocked by the U.S. Senate.

Read more »

question marks written reminders tickets
Bank Stocks

Is TD Bank (TSX:TD) or Royal Bank (TSX:RY) Stock a Buy?

Canadian banks appear oversold. Is this the right time to buy TD or Royal Bank stock?

Read more »

edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Bank Stocks

2 Top TSX Financial Stocks to Buy for a Retirement Fund During the Market Correction

These top TSX financial stocks now look oversold for a self-directed TFSA or RRSP portfolio.

Read more »

Growth from coins
Dividend Stocks

Dividends Aren’t Guaranteed, Yet 3 TSX Stocks Keep Raising Payouts

No company will guarantee dividend payments, but three TSX Dividend Aristocrats will not break their dividend-growth streaks.

Read more »

Bank Stocks

Should You Buy TD Bank (TSX:TD) Stock Now?

TD stock looks oversold. Is this the right time to buy?

Read more »

Bank Stocks

Passive Income: Buy Bank of Nova Scotia (TSX:BNS) Now

Looking to buy a big bank stock? Investors should look to buy Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) for income and…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

2 Big Canadian Bank Stocks With Great Value Today!

The big Canadian bank stocks reported their quarterly earnings recently. Here are a couple of bank stocks that provide great…

Read more »