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The markets are getting twitchy, and investors are nervous.
Wall Street took a hit in mid-November as worries about a punctured AI bubble dominated trading. Big earnings from NVIDIA and a strong rally staved off what could have been a panic-inducing plunge and helped restore some measure of confidence.
What we witnessed was an historic anomaly. November is usually one of the best months of the year for stocks. According to Yardeni Research, the S&P 500 was up 62% of the time in the Novembers from 1928 to 2024. The average gain in the winning years was 4.12%. But last month, the S&P closed November with a hairline gain of only 0.1%.
What are we to make of this? For starters, the selloff focused mainly on the tech sector, especially those companies that are heavily involved in AI. Second, as we have noted here on several occasions, the markets were looking expensive – priced to perfection in many cases. In those circumstances, it’s not surprising that some investors decided some profit-taking might be wise.
It’s worthwhile to note that, historically, the best month of all for stocks has been December, which has produced gains 72% of the time since 1928, and this December has been no exception.
But clearly, volatility can erupt at any time. What should you do if you’re worried about another sudden roller-coaster ride? If you have a well-balanced portfolio, stick with your plan and ride out any slide in the markets. If some great values emerge, as they did with the bank stocks in 2008, use some cash to take a position or add to an existing one.
If your portfolio is making you queasy, you may want to make some derisking moves.
Here are four ETFs from my Internet Wealth Builder recommended lists that would help achieve that goal.
BMO Low Volatility Canadian Equity ETF (TSX: ZLB). This ETF invests in an actively managed portfolio of large-cap, low-volatility Canadian stocks. It is rebalanced in June and reconstituted in December. After a fall in April, this fund has been climbing steadily and is up more than 20% year to date. The fund was launched in October 2011 and has $5.4 billion in assets under management. The MER is 0.39%.
Low volatility stocks normally show less price movements, up or down, than the broad market. So, when the indexes fall, the stocks in this ETF should better retain their value. That doesn’t mean they won’t drop. Just not as much.
There are 54 positions in this equal weight portfolio, all Canadian companies. Grocery giants Empire, Loblaw, and Metro occupy three of the top four positions. Utilities Fortis and Hydro One round out the top five.
In terms of sector breakdown, 22.02% is in financials, 18.98% in consumer staples, 16.76% in utilities, and 12.23% in industrials. Energy, which is the second-largest sector in the S&P/TSX Composite, has negligible representation and information technology accounts for only 2.44% of the assets.
The fund makes quarterly cash distributions, which are steady at $0.28 per unit ($1.12 per year). At that rate, the yield at the current price is 1.95%. This is a very tax-efficient fund. In 2024, about 48% of the distributions were treated as eligible dividends, meaning they qualified for the dividend tax credit if held in a non-registered account. About 45% was classed as capital gains. The remaining 7% was treated as return of capital.
Over the past 11 calendar years, this fund has been down only twice, and both times the declines were minimal. The worst was a drop of 2.83% in 2018. In 2022, which was a terrible year for stocks, this fund lost only a fractional 0.37%.
Conclusion: This ETF offers strong downside protection during stock market selloffs. It’s a good choice for risk-averse investors.
iShares Canadian Core Bond Index ETF (TSX: XBB). This ETF is designed to replicate the returns of the total Canadian bond universe, including government and corporate issues. It’s been a choppy year, but the fund is up a little over 3% so far in 2025. The fund was launched in November 2000 and has almost $9 billion in assets under management.
There are 1,813 positions in the portfolio. About 41% of the assets are in bonds maturing in five years or less (lowest risk). At the long end, 22.5% is in bonds with a maturity of 15 years or more (highest risk). Bonds have a stabilizing effect on a portfolio. Studies have repeatedly shown that during bear markets, portfolios with a higher percentage of bonds fare better.
The effective duration (a measure of interest rate risk) is seven years. The MER is very low at 0.1%.
Payments are made monthly, currently at a rate of $0.08 per unit ($0.96 a year). At this level, the forward yield is 3.4%.
Conclusion: The bond market is reasonably stable right now. If the stock market hits correction mode, the pressure will be on central banks to reduce rates, which should boost bond prices.
iShares S&P/TSX Global Gold Index ETF (TSX: XGD). This ETF tracks the performance of the index of the same name, less expenses. It invests in mining and royalty stocks, rather than bullion itself. Stock markets have done well this year. Gold has done better. This ETF is ahead 112% year-to-date. The fund was started in March 2001 and has $3.5 billion in assets. The MER is 0.6%.
Gold is a safe-haven asset. If we experience a severe market correction, demand for the precious metal should continue. Holdings include some of the world’s top gold producers/streamers including Newmont, Barrick, Franco-Nevada, Wheaten Precious Metals, and Agnico Eagle. There are 52 stocks in the portfolio.
Payments are made semi-annually, and they vary. The June payout was $0.143 per unit. Over the past 12 months, investors have received distributions totaling about $0.24, for a yield of 0.5%.
Conclusion: Gold has had a strong year, but if stock markets crack, there could be more profits to come. If you prefer the metal to the miners, choose SPDR Gold Shares (NYSE: GLD) instead.
BMO Equal Weight Utilities Index ETF (TSX: ZUT). This ETF replicates the performance of the Solactive Equal Weight Canada Utilities Index net of expenses. It holds the stocks in the same proportion as they are reflected in the index. The fund is 24.7% higher year-to-date, as of Oct. 31. The fund was launched in January 2010 and has $813 million in assets under management. The MER is 0.61%.
Utility stocks offer several advantages in a down market. For starters, they are low volatility because of the nature of the business – distribution of electricity and natural gas. Most of the income is regulated, which means it is not subject to major upheavals. Utility stocks are interest sensitive, so if central banks lower rates in response to a market decline, this fund should benefit.
The portfolio consists of 13 stocks. The largest holdings are TransAlta Corp. (8.4%), Brookfield Infrastructure Partners (8.37%), and Brookfield Renewable Partners (8.29%).
Distributions are paid monthly at the current rate of $0.07 per unit.
Conclusion: This ETF provides exposure to the biggest Canadian utilities offering modest growth, safe dividends, and low risk.
Worried investors can also consider converting some assets to cash, but the ETFs mentioned above offer more upside potential.
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.
Follow Gordon Pape on X at X.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.
For more information and details on how to subscribe to Gordon’s newsletters, go to www.buildingwealth.ca/subscribe.
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/peshkov
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