Anti-anxiety ETFs

Three that hold their own in down markets

It’s not easy to build a sleep-at-night portfolio in the upside-down world of Donald Trump. His objectives seem clear – create an environment that encourages investment in U.S. industry, while enriching the Treasury at the same time. But his methodology is erratic, leaving businesses and investors confused about what is actually happening and how it affects them.

With this in mind, I reviewed the recommended list of exchanged-traded funds (ETFs) in my Income Investor newsletter and found three that I think are well positioned for the current economic and political situation. Each invests in a different type of security, but as you’ll see, they are all holding their own at this time.

Here are reviews of all three. Prices are as of the close on March 28.

BMO Low Volatility Canadian Equity ETF ( TSX: ZLB) invests in a portfolio of large-cap Canadian stocks that have a low-beta history, meaning they are less sensitive to broad market movements and therefore theoretically less risky. The portfolio is rebalanced in June and reconstituted in December.

The fund has been holding its own in the face of market volatility caused by the policies of the U.S. administration. Since we recommended it in January 2020, the fund has gained 36%, not including distributions. Over the past 10 years (to Feb. 28), the average annual total return is 9%.

The portfolio is evenly balanced, with Metro Inc. (4%), Empire Co. (3.9%), and Loblaw Cos. (3.7%) being the largest holdings – all food distributers.

In terms of sector breakdown, 21.5% is in financials (a significant underweight from the TSX Composite), and 17.5% in consumer staples. There are no energy stocks, despite the fact it’s the second-largest sector in the S&P/TSX Composite.

The fund was launched in October 2011 and has $4 billion in assets under management. The MER is 0.39%. Distributions are paid quarterly. The most recent was $0.28 per unit. Over the last 12 months, payouts have totaled $1.12 per unit. At that rate, the yield at the current price is 2.3%.

BMO classifies this fund’s risk level as low-medium. Although it is a low-volatility fund, it is not immune to stock market risk. However, this fund should hold up better than the broad market in the event of a steep decline.

Overall, this ETF is well positioned for current market conditions and offers some downside protection in the event of a continued selloff.

Global X Gold Producer Equity Covered Call ETF (TSX: GLCC) originally debuted under the Horizons name. All the Horizons funds have been rebranded as Global X. It holds a portfolio of international gold producers and actively writes covered call options against them. The top names include Kinross Gold, AngloGold Ashanti PLC, Barrick Gold, Pan American Silver, and Gold Fields Ltd.

The fund was launched in 2011 and has $321 million in assets under management. The MER is 0.78%. This fund makes distributions monthly, currently at a rate of $0.23 a unit.

With gold at record highs, this fund is up 64.9% in the past 12 months (to Feb. 28) and shows a 10-year average annual compound rate of return of 9.39%.

Because of the rise in the gold price and the income generated by covered call writing, investors are enjoying the rare luxury of large capital gains and above-average cash flow at this time. I can’t predict how long that will last, but the chaos created by Trump’s trade wars suggest it could be a while. Take advantage of the situation while you can.

iShares 0-5 Years TIPS Bond Index ETF (TSX: XSTP) is a short-term ETF that invests in a portfolio of inflation-protected bonds, known as TIPS. They’re issued by the United States Treasury. The fund is designed to protect your money while providing a modest rate of return. It also is a hedge against a return of inflation, which could be triggered by the trade war.

The fund posted a big gain of 14.11% in 2024, but that was mainly driven by the exchange rate as the loonie fell against the greenback. The U.S. dollar version of this fund gained 4.62%, which reflects the true performance.

Even that number is an outlier, caused by the inverted yield curve during the year, which had short-term rates higher than long-term ones. The curve is now closer to normal. So, if inflation were to stay low, I would expect this ETF to return between 1.5% and 2% in 2025. To date, it is ahead 2.17% for the year.

But that’s a big “if.” We’re already seeing signs that inflation is ticking higher. If that trend continues, this fund will be a good place to hold some money at low risk.

Investors should also note the unevenness of the distributions. Some months they are very healthy, but sometimes the payments are zero, as in the January-March period last year. There’s no predictability.

The bottom line is that this ETF has delivered bigger gains than we would normally expect.

These ETFs are generally suitable in defensive portfolios. But as always, consult with your financial advisor before investing to ensure the funds align with your investment objectives and risk-tolerance level.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.

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Notes and Disclaimer

Content © 2025 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.

Image: iStock.com/Liubomyr Vorona