Portfolio protection can come in many forms, from individual stock picks with defensive characteristics to investing in specific index funds with overweight exposure to certain key defensive trends in the coming year.
I think some passive investing via ETFs is always a good strategy, and that’s core to my personal investing mantra. However, for stock pickers out there (and who doesn’t like to pick winners), I’ve also got a few potential winners in the New Year I think investors would do well to consider here.
With that said, let’s dive into two top Canadian stocks I think can provide ample downside protection for those thinking long term.
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Boyd Group
With the average age of cars on North American roads continuing to increase (and there are expectations this trend will continue for some time), former growth stock champion Boyd Group (TSX:BYD) is one of my top ideas for 2026.
The thesis around this company is relatively simple. If vehicle owners keep their cars in use for longer, there’s going to be a greater impetus to fix up their vehicles and keep them running than take on a new auto loan with a sky-high rate. And because new and used vehicles are now among their most expensive ever (with the average new vehicle costing a little more than US$50,000 a pop), this is a trend I think will be in place until prices or interest rates come down meaningfully.
I don’t expect either to be the case in 2026, so Boyd Group (one of the largest auto body operators in North America) remains a solid bet. As the company continues to consolidate this fragmented industry and improve its pricing power (and margins), I think the stock’s muted year-to-date gain of 3% could be the buying opportunity long-term investors are looking for.
RBC 1–5 Year Laddered Canadian Bond ETF
Another key option I think Canadian investors can consider for meaningful upside if interest rates come down (but also portfolio protection in the event equities slide overall) is the RBC 1–5 Year Laddered Canadian Bond ETF (TSX:RLB).
This ETF provides investors with exposure to short-duration Canadian bonds. Thus, for those who think the short end of the yield curve is likely to continue to come down as Tiff Macklem and the Bank of Canada continue to drop rates, this is the way I’d go to play this trend.
With a current dividend yield of 3.2% and a short-duration bond portfolio, investors won’t see meaningful swings from long-term interest rates. Long-term rates can still fluctuate due to tariff, trade, or macroeconomic concerns, which have impacted this sector in the past. In other words, I think of this ETF as one of the safer ways to play declining yields over the course of the coming years.
Importantly, this ETF provides this yield in laddered form, providing more consistent income for those looking to generate such yield, which can be reinvested in other assets over time. Instead of parking one’s cash as cash within the portfolio, this is the way to stay invested and earn yield while waiting for better opportunities to arise.
