The market is sitting near all-time highs. While it is encouraging for investors already invested to see their investments grow, it also raises a question for new investors who are still considering where to invest in the TSX.
Adding to that, there’s also the risk of the next pullback being right around the corner. That pullback can absolutely happen and is a normal part of the cycle.
That’s why waiting for the perfect entry point can leave investors sitting on the sidelines while established businesses continue to grow and pay dividends.
Rather than trying to predict the next pullback, investors can put money to work through regular investments. That approach keeps the focus on building a long-term position instead of finding a perfect day to buy.
Fortunately, there are plenty of those great businesses to invest in that can offer that long-term growth and income. Even better, some are lower-volatility options to offset some of that market risk.
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Use XIC to invest in the TSX broadly
Those looking to invest in the TSX but want to avoid picking individual winners can opt for a broad market ETF. Specifically, iShares Core S&P/TSX Capped Composite Index ETF (TSX: XIC).
The fund is one of the simplest ways to gain broad exposure to some of the best companies in Canada. XIC includes a mix across the financial, energy, industrial and materials sectors, to name just a few.
That’s an important note because the market is volatile. A pullback can hit some sectors harder than others. By investing in an ETF like XIC, investors gain broad diversification across the TSX rather than relying on a few individual stocks.
Over the trailing 12-month period, the fund has returned gains of over 16%. Additionally, the fund offers a small, yet still important quarterly distribution that pays 1.9% as of the time of writing.
For long-term investors specifically, that small yield can provide additional momentum to compounding.
Choose ZLB for a lower-volatility approach
Investors who prefer a lower-volatility option have another ETF pick to consider that comes in the form of the BMO Low Volatility Canadian Equity ETF (TSX: ZLB).
ZLB is more focused on Canadian stocks with lower price volatility than the broader market. As a result, the fund is made up of some of the most defensive picks on the market.
Think utilities, grocers and financial companies. Even with a more defensive tilt, the market can still decline, but ZLB’s components are less exposed to wide market swings.
To be clear, lower volatility doesn’t mean that there’s no risk. There’s still going to be market swings, just not what you would see in higher-volatility stocks.
Like XIC, ZLB offers investors a quarterly distribution. The current yield works out to 1.9%, making it a respectable payout that can add to overall compounding growth over time.
ATD offers a different way to invest in the TSX
For investors willing to take on more company-specific risk, Alimentation Couche-Tard (TSX: ATD) rounds out the top three picks for those looking to invest in the TSX.
Couche-Tard is one of the largest convenience-store and gas station operators on the planet. The company has seen massive growth over the years, primarily through well-executed acquisitions.
Couche-Tard’s international presence extends to over a dozen countries outside of North America. This gives it exposure to additional acquisition opportunities.
A recent example of this is Couche-Tard’s plans to acquire Polish convenience store operator, Żabka. The company operates over 13,000 stores across Poland and Romania.
Turning to income, Couche-Tard offers a quarterly dividend that carries a yield of 1.1%. Like the other investments mentioned above, Couche-Tard is primarily a growth stock, not an income-producer.
That being said, Couche-Tard has provided a series of generous annual increases to its dividend over the years.
Why it still makes sense to invest in the TSX near all-time highs
Each of the three investments mentioned above offers something unique for those looking to invest in the TSX. That includes broad Canadian market exposure from XIC, a lower-volatility option in ZLB, and a growth-focused investment in Couche-Tard.
Together, these three investments are superb options to consider in a larger, well-diversified portfolio.
