Investing for the long haul means thinking about assets that are both steady and have the potential to grow. If you’re a Canadian using a Tax-Free Savings Account (TFSA), picking the right investments is key to getting the most out of those tax-free returns. One interesting option to consider is BMO Equal Weight Banks Index ETF (TSX:ZEB). This exchange-traded fund (ETF) gives you exposure to Canada’s big banks, which are generally seen as strong and reliable.
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Why Canadian banks work
Canadian banks have been important to our economy for a long time. These have shown they can stay strong even when the global economy hits a rough patch. The careful way of lending money and the strict rules followed have given these a reputation for being stable. This steadiness has often led to dependable returns for people who invest in them.
BMO Equal Weight Banks Index ETF does things a bit differently. It invests the same amount of money in each of the major Canadian banks. This approach means no single bank dominates the fund, which helps spread out the risk within the banking sector. As of writing, this ETF had about $4.36 billion in assets, showing that a lot of investors have confidence in it. The fund also has a yield of around 4.19%, which means it provides a regular stream of income for investors.
In recent years, Canadian banks have continued to show their strength. For example, in the first three months of 2025, Royal Bank of Canada reported a net income of $5.1 billion. That’s a big jump of 46% compared to the same time last year! This kind of performance highlights how well these banks can do, even when the economy isn’t perfectly smooth sailing.
Why ZEB?
Putting your money into ZEB through a TFSA has some really nice perks. Because it’s in a TFSA, any dividends you earn and any profits you make when you eventually sell the ETF are completely tax-free. This can really boost your overall investment returns, allowing your savings to grow more effectively over time without the drag of taxes.
While the Canadian stock’s return so far this year was down 8.5% at writing, it’s important to look at the bigger picture. The stock market naturally goes up and down, and historically, the banking sector has tended to trend upwards over the long term. ZEB’s equal-weight approach helps to lower the risk that comes with any one bank not doing so well. It gives you a more balanced slice of the entire sector.
Looking ahead, experts are predicting that Canadian banks will see some modest growth in their earnings through 2025. Things like interest rate changes and how the overall economy is doing will play a role in their profits. However, because these banks are fundamentally strong, they are generally seen as being in a good position to handle whatever challenges might come that way.
Bottom line
BMO Equal Weight Banks Index ETF could be a smart choice if you’re looking for a mix of stability and growth in your TFSA. By giving you equal exposure to Canada’s leading banks, ZEB offers diversification within a sector that’s known for being resilient. While there might be some ups and downs in the short term, the long-term outlook for Canadian banks looks promising. This makes this ETF a good option to consider if you’re planning to buy and hold for the long run.
