Topic: How To Invest

Q: Pat, what do you think of me holding the BMO Low Volatility Canadian Equity ETF to lower the overall volatility of my portfolio? Thanks.

Article Excerpt

A: The BMO Low Volatility Canadian Equity ETF, $33.51, symbol ZLB on Toronto (Units outstanding: 72.8 million; Market cap: $2.4 billion; www.etfs.bmo.com), provides exposure to a low beta-weighted portfolio of Canadian stocks. The aim is to reduce your exposure to market volatility. The ETF selects 40 or so (currently 47) of the lowest beta stocks (more on beta below) from the 100 largest and most-liquid stocks in Canada. The stocks in the portfolio are rebalanced in June and reconstituted in December. That’s when any stocks are dropped or new ones get added. The BMO Low Volatility Canadian Equity ETF has an MER of 0.39%. It currently yields 2.9%. The fund’s current top holdings are Hydro One, 4.5%; Franco-Nevada, 4.3%; Fairfax Financial, 3.0%; Empire Company, 2.9%; Emera, 2.8%; Intact Financial, 2.7%; Metro Inc., 2.6%; Quebecor, 2.5%; Canadian Utilities,2.5%; and Waste Connection, 2.5%. This ETF relies on beta scoring, a commonly used but sometimes misleading measure of volatility. To calculate a stock’s beta, an index like…

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