For Canadian investors looking to grow their wealth over the long haul (think the next 10-25 years, rather than just the next couple of weeks or months), I think that taking on a bit more risk for a shot at additional rewards could make a lot of sense, especially when market sentiment is in a bit of a bad spot.
Undoubtedly, the broad markets have been slipping of late, with many visible cracks in the AI trade. With AI bubble fears likely causing the retail crowd to ditch their shares with the intent of asking questions later, or waiting until the market waters have more of an opportunity to calm, I think there’s a chance for young, growth-minded investors to take on the role of a contrarian.
Of course, buying the dip has been rewarded countless times over the past three years or so. And while AI valuations are rich, I think that there’s no denying that many of the top names are cheaper today than at the start of the month, when the S&P 500 and Nasdaq 100 were running quite hot, with shares of many AI innovators melting up viciously.
Though it might be too soon to be a buyer, I think that those willing to put up with near-term downside might wish to look at some of the more intriguing ETF products out there. Indeed, it really can be as easy as set and forget. And in this piece, we’ll look at two ETFs, one risk-on and one risk-off, that could help new, young investors get on the right track as they look to build wealth for the decades.
Nothing against stock-picking, but these ETFs make it all too easy for passive investors to get on the wealth-creation fast track!
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Invesco Nasdaq 100 Index ETF
Invesco Nasdaq 100 Index ETF (TSX: QQC) is one of the cheapest (0.20% management expense ratio) Canadian ways to bet on the tech-heavy Nasdaq 100, which recently sold off just north of 6% from its recent peak. Undoubtedly, tech has been where much of the pain has been in recent weeks, and while the pullback may not be over quite yet (a 10% decline wouldn’t be out of the ordinary), I view the index as primed to deliver as the AI revolution looks to pay off longer term.
Right now, many investors are shying away from the trade, probably due to valuation uncertainties and worries about the cash needed to invest in all these massive AI data centres, as well as the teams behind the large language models.
Despite the hefty spend, I think there’s a strong argument that AI is not a bubble. In many ways, it feels like betting on “no bubble in AI” is the contrarian trade. And that’s where I’d rather be at a time like this, when investors are dumping big tech amid the wave of negativity.
BMO Low Volatility Canadian Equity ETF
BMO Low Volatility Canadian Equity ETF (TSX: ZLB) is more of a risk-off play that can help balance a risk-on holding like the QQC. With a low beta of 0.57, shares of the ZLB have what it takes to side-step a tech-focused growth scare or a gradual fading away of the AI trade.
In fact, shares are close to all-time highs, just north of $57 per share, despite the November jitters. With solid low-beta dividend payers and a diversified mix of defensive names, I consider the 2%-yielding ETF to be a great way to seek shelter if you’re looking to smooth the ride higher. As one of the better “low volatility” ETFs on the TSX, I’d not be afraid to buy and hold as the slow, steady, value-oriented ETF begins to quietly outshine most other factor-based ETFs on the market.
