The ETFs That Canadians Are Sleeping On (But Shouldn’t Be) Right Now

These three high-quality Canadian ETFs are perfect for investors in 2026, especially with increasing uncertainty and volatility in markets.

Key Points
  • Look beyond headline S&P/TSX ETFs and consider overlooked Canadian funds that offer defensive characteristics, sector exposure, or reliable income amid 2026 volatility.
  • Three to watch: ZLB (BMO Low Volatility Canadian Equity ETF) for lower‑volatility Canadian stock exposure; XRE (iShares S&P/TSX Capped REIT) for diversified real‑estate exposure and ~4.85% yield; ZWU (BMO Covered Call Utilities ETF) for utility exposure plus covered‑call income (~6.9% yield).
  • Together they help reduce downside risk, provide sector‑specific recovery opportunities, and boost passive income while keeping you invested.

When Canadians start looking for exchange-traded funds (ETFs) to buy, most of the attention usually goes to the same handful of funds.

Broad market ETFs that track the S&P 500 or the TSX tend to dominate the conversation, and for good reason. They offer simple diversification and broad exposure to the entire market, making them ideal for a buy-and-hold strategy.

However, because those ETFs get so much attention, there are many other high-quality Canadian ETFs that can offer unique advantages but often get overlooked.

Coming into 2026, markets were already trading near highs in many areas. At the same time, uncertainty around interest rates, geopolitical tensions, the ongoing conflict in Iran, and now rising oil prices have significantly increased volatility.

That’s why in the current environment, Canadian investors can benefit from looking beyond the most obvious ETFs and considering funds that provide defensive characteristics, reliable income, or exposure to sectors that may still have room to recover.

So, with that in mind, if you’re looking for high-quality Canadian ETFs that you can buy with confidence in this environment, here are three top picks that are often overlooked by investors.

ETF is short for exchange traded fund, a popular investment choice for Canadians

Source: Getty Images

The perfect Canadian ETF that risk-averse investors can buy right now

If you’re worried about rising oil prices and the uncertainty it could cause in both the stock market and economy, one ETF that often flies under the radar but can be particularly useful for investors is BMO Low Volatility Canadian Equity ETF (TSX: ZLB).

As its name suggests, the fund focuses on selecting Canadian stocks that have lower volatility compared to the broader market.

So, rather than simply tracking the TSX like a simple index fund, the ZLB ETF offers exposure to stocks with more stable price movements.

Therefore, investors still have exposure to high-quality Canadian stocks; however, they are businesses that tend to experience smaller swings during corrections or pullbacks.

That can be particularly valuable in today’s environment. With the ongoing uncertainty about the conflict in Iran and rising energy prices creating potential volatility in the broader market, many investors are looking for ways to stay invested while reducing risk.

It’s also worth noting that lower volatility stocks are often some of the safest and most defensive businesses you can own, making the ZLB one of the most reliable ETFs to buy right now.

A top ETF offer Canadians exposure to the real estate sector

In addition to the ZLB ETF, another high-quality ETF many Canadians are overlooking right now is iShares S&P/TSX Capped REIT Index ETF (TSX: XRE)

The XRE focuses specifically on Canadian real estate investment trusts (REITs), offering investors exposure to a diversified portfolio of assets all across the country. These include residential properties, retail centres, office buildings, industrial facilities, and more.

One of the biggest advantages of XRE is that it offers instant diversification across multiple real estate subsectors. Instead of trying to pick individual REITs, investors can gain exposure to the entire sector with a single ETF.

Furthermore, many REITs saw their share prices pressured in recent years as higher interest rates increased borrowing costs and reduced investor appetite for income-focused assets.

Therefore, right now, while there’s still value in the sector and with the XRE ETF offering an attractive yield of 4.85%, it’s easily one of the best Canadian ETFs to buy now.

A top pick for dividend investors

If you’re a dividend investor primarily focused on boosting your passive income, one of the best Canadian ETFs to buy now might be BMO Covered Call Utilities ETF (TSX: ZWU).

Owning an ETF of utility stocks is ideal, since they’re typically known for generating stable cash flow and paying reliable dividends. In addition to utility stocks, though, the ZWU may also invest in telecommunications or pipeline companies with similar defensive operations.

The majority of the fund is invested in utility stocks, though some of the most defensive stocks in the market. On top of that, though, the ETF also uses a covered call strategy to enhance income.

That means that by writing covered calls on a portion of its holdings, the fund collects option premiums that are then distributed to investors alongside the dividends generated by the underlying stocks, significantly boosting the ETF’s overall yield, which currently sits at roughly 6.9%.

So, if you’re a dividend investor looking for a reliable high-yield Canadian ETF to buy, the ZWU is undoubtedly a top choice.

Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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