Many beginner investors are probably wondering if they should jump into the deep end of the investment waters right off the bat by starting a brokerage account so that they can pick and choose their own stocks. Indeed, self-guided investing can be a great way to minimize investment fees and other expenses relative to investing in mutual funds.
Undoubtedly, taking command of your own stock portfolio may not just lead to solid results over the long run. Still, it can help you learn more about financial markets and how to manage risk in an appropriate manner.
Further, you can understand just how much risk you’ll be able to handle as the market swings come your way over the years. Indeed, the thought of market corrections, crashes, and bear markets is enough to keep new investors seated on the sidelines. However, I think that such selloffs should not be avoided.
Rather, they should be expected. And investors should know how to hang on and react as the market heads south. If you’re investing for retirement, the fact of the matter is the market is going to have its rough rides. And you will have to know how to ride them out rather than seeking to evade them.
Getting started investing amid market turbulence
With the right mindset and temperament, every new investor can do well in markets over time. But if you’re just starting out, it may make more sense to take baby steps than construct a portfolio from scratch, especially if you’re dealing with a smaller sum to put to work. Indeed, that’s where certain exchange-traded funds (ETFs) come into play. In this piece, we’ll look at one attractive ETF that I view as cheaper and perhaps even better constructed than most mutual funds out there right now.
As you learn and grow as an investor, you may find it worthwhile to move on from ETFs to stock selection. That said, if you’re not fully invested in learning (pardon the pun) and furthering your investment knowledge, it’s okay to stick with ETFs. And for most, a mix of ETFs, stocks, real estate investment trusts, and other securities makes a lot of sense.
ETFs can form a large portion of your portfolio, given the instant diversification benefits and the low fees they command. And let’s not forget that you can save a lot in trading commissions if you’re a new investor with a smaller sum (let’s say $3,000 or less) to spread across several securities.
The ZLB: One of my favourite BMO ETFs to tame volatility
Enter BMO Low Volatility Canadian Equity ETF (TSX: ZLB), a low-cost way to deal with a more volatile market, recession risks, and numerous other unknowns that could have investors biting their nails. Indeed, the ZLB is a very interesting ETF that was built to perform in smooth, upward bull markets and those wobbly, choppy ones.
Of course, no ETF will be 100% secure from all market rumbles. At the end of the day, no equity-based ETF is immune from market risks entirely. That said, I think the ZLB does a fantastic job of curating some of the best low-beta (meaning less correlation to the market) stocks that can grow steadily over extended periods of time.
Even as the tech trade wobbles and drags down the S&P 500 and the TSX Index, the ZLB has been relatively little moved. In fact, it’s at a new all-time high right now after surging close to 18% in the past year. Despite the run, I still view the name as an excellent value for investors looking to start today.
