Exchange-traded funds (ETFs) are becoming increasingly popular investment options for Canadians. One of the many appeals in that approach is owning a wider slice of the market rather than just one individual ticker. Prospective investors who look beyond those popular ETFs will find some that Canadians are sleeping on right now.
These ETFs have massive long-term potential for investors. Often, these come with a mix of diversification, income, and growth that is appealing to any investor’s portfolio.
Here are three of those lesser-known ETFs to consider today.
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ZWC offers income strength that Canadians are missing
The first of the ETFS that Canadians are sleeping on is BMO CA High Dividend Covered Call (TSX: ZWC). BMO High Dividend Covered Call is one of the most overlooked income ETFs in Canada.
That’s surprising considering the ETF provides both steady cash flow and defensive positioning. BMO High Dividend Covered Call uses a covered‑call strategy on Canadian blue‑chip stocks. This helps to generate higher income while reducing volatility.
Part of the reason for that limited visibility of the fund is the general misunderstanding around covered calls. In short, there’s a stereotype that they’re too complicated, which makes many investors look beyond the very investment that’s designed for stability and yield.
That’s precisely where BMO High Dividend Covered Call fits into a portfolio. It offers income without excessive risk by leaning on established Canadian companies. The options enhance cash flow, making it appealing for income seekers.
As of the time of writing, BMO High Dividend Covered Call offers a monthly payout with a yield of 5.7%.
For prospective investors, BMO High Dividend Covered Call may be one of the ETFs that Canadians are sleeping on right now, but it doesn’t need to stay that way.
XDG brings global dividend growth
Canada’s market is full of strong performers that continue to provide solid income and growth. But that’s not to say that there aren’t other, perhaps better income and growth options outside of Canada.
That’s why the second of the three ETFs that Canadians are sleeping on is so important. iShares Core MSCI Global Quality Dividend Index (TSX: XDG) offers exposure to global dividend-growing companies.
More specifically, businesses with long records of increasing payouts, strong balance sheets, and diversified revenue streams.
And despite that appeal, iShares Core MSCI doesn’t get the attention it deserves. The fund simplifies the need to pick individual stocks or navigate currency risks. Instead, there’s a single fund that offers a basket of those global top performers that comes with a 2.87% yield.
In short, iShares Core MSCI isn’t just one of the ETFs that Canadians are sleeping on; it’s a long-term growth and income opportunity.
XRE is quietly positioned for a REIT rebound
A third variant of the ETFs that Canadians are sleeping on right now focuses on real estate investment trusts (REITs). The inflated interest rates that we’ve seen over the past several years have pushed investors out of REITs and into other segments of the market.
That rotation has created the environment why iShares S&P/TSX Capped REIT (TSX: XRE) is now one of the ETFs that Canadians are sleeping on.
iShares S&P/TSX Capped REIT provides exposure to Canada’s REIT market. These businesses generate recurring rental income that persists through economic cycles.
More specifically, the fund’s basket includes some of the largest and most established REITs, which often come with decades of experience and higher yields.
The fund offers a monthly distribution that, as of the time of writing, offers a yield of 4.9%.
For prospective investors, the key advantage here is owning a basket of some of the highest-yielding REITs on the market. This reduces the risk of owning one ticker but still offers the monthly distribution and diversification.
iShares S&P/TSX Capped REIT is a perfect example of an ETF that investors avoid due to recent performance, despite the improving market for the long term.
Will you buy these ETFs that Canadians are sleeping on?
No stock or ETF is without risk, and that includes the three ETFs mentioned above. That being said, the trio of options above offers investors a clear path to growth, income generation, and diversification on a sector and global scale.
Investors who can look past the popular array of Canadian tickers will find that these ETFs that Canadians are sleeping on are superb options that should be key in any larger, well-diversified portfolio.
