With market volatility returning to elevated levels and the threat of a global trade war looming over the economy, investors are understandably cautious. That’s why some of the best investments you can make today are in reliable exchange-traded funds (ETFs) that generate considerable passive income.
There’s a tonne of uncertainty in this environment. Confusion about the direction of interest rates, uncertainty about inflation, and the constant threat of new tariffs continue to create massive swings in stock prices, making it increasingly difficult to know which individual companies to trust with your hard-earned capital.
That’s exactly why ETFs are one of the best investments you can make today. Instead of trying to pick one or two stocks, you can invest in a diversified basket of reliable Canadian companies and collect consistent passive income along the way.
In the current environment, when protecting your portfolio is just as important as growing it, buying high-quality, dividend-focused ETFs can be one of the best strategies for long-term investors.
Not only can these ETFs offer some downside protection due to the reliable stocks they own, but the consistent passive income they generate gives you a reason to stay invested even through all the short-term noise.
So, if you’re looking for a lower-risk way to ride out the current market swings while still collecting attractive yields, here are two of the best Canadian ETFs to buy now.
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One of the best ETFs to buy for passive income
If you’re looking for a reliable investment for your hard-earned money in the current environment, iShares S&P/TSX Composite High Dividend Index ETF (TSX: XEI) is one of the best on the TSX.
The XEI ETF owns a portfolio of high-yielding Canadian companies across multiple sectors, which makes it ideal for generating consistent passive income. These sectors include financials, utilities, energy, telecom, and more.
That diversification is crucial in this environment as it helps to reduce risk and ensures that the fund isn’t overly reliant on just one or two sectors to perform well.
Some of the top holdings include major blue-chip names like Enbridge, Fortis, and Telus, the kinds of companies that have been paying dividends for decades, and most of them are well known for increasing their payouts over time.
Therefore, these high-quality Canadian stocks can weather the storm in the short term, which is why the XEI ETF is one of the best investments to make today, not just for its reliability but also for the passive income it generates. For example, right now, the ETF yields around 5.7%.
So, if you’re looking to help shore up your portfolio and boost the passive income your investments are generating, there’s no question that one of the best investments to buy now is the XEI ETF.
A high-quality dividend ETF offering added downside protection
In addition to the XEI ETF, another high-quality investment that income investors can buy today is BMO Canadian High Dividend Covered Call ETF (TSX: ZWC).
Just like XEI ETF, the ZWC holds a portfolio of top passive-income-generating stocks. However, the one major difference between the two is that the ZWC ETF also adds a layer of protection by using a covered call strategy.
Covered calls allow the fund to generate extra income by writing call options on the stocks it holds. The trade-off of that extra income, though, is that it limits some of the upside potential if stocks are in a bull market. However, if the stock market continues to trade flatly or even starts to decline, the ZWC ETF can actually outperform.
What really makes ZWC attractive right now, though, is the yield. Although it holds many of the same stocks as the XEI ETF, with the additional income generated from the covered call strategy, the ZWC ETF offers a yield of around 6.9%.
Therefore, given the attractive yield it offers, along with its portfolio of reliable Canadian stocks, the ZWC is one of the best ETFs to own for the long haul, especially during periods of heightened volatility.
So, if you’re looking to boost your passive income with a reliable investment in this uncertain environment, there’s no question the ZWC ETF is one of the best to consider.
