BMO S&P/TSX CAPPED COMPOSITE INDEX ETF $41.29 (Toronto symbol ZCN; TSINetwork ETF Rating: Conservative; Market cap: $12.5 billion) tracks the S&P/TSX Capped Composite Index.


The index includes over 200 stocks, which represent more than 90% of the Canadian equity market. Individual stock weights are capped at 10% of the index’s market capitalization.



The ETF started up in May 2009 and charges a very low MER of 0.06%. The fund yields 2.3%.



We like most of the stocks this ETF holds. However, we see the “capped” aspect of its mandate as a negative, since it introduces a filtering mechanism that will hurt your returns.

Closed-end funds work with a fixed asset base invested in a portfolio of securities. The value of their assets rises and falls depending on how they invest. Their units trade like stocks, and most often on a stock exchange. They may trade above the per-unit value of the investments they hold—what brokers call “at a premium” to their net asset value. However, for the most part, they trade at a discount.


If the manager of a closed-end fund does a bad job, unit owners pay a double penalty: the value of the fund’s assets falls, and the discount on that value also widens. So it’s a mistake to invest in a closed-end fund simply because you like the area it focuses on, or because it’s available at a discount to asset value. You need to look at how wisely it picks stocks to invests in.

Over the long term, most stock markets move up. But there are times when sharp declines inflict heavy losses on any investor’s portfolio holdings. For example, in 2008 to 2009, U.S. stock markets declined by 51%; in 2020, they dropped by 34%; and in 2022, they fell 25%. Other markets had similar declines. What’s more, these sharp losses often persist for long periods of time.

Meanwhile, there are a range of ETFs that aim to help investors buffer their portfolios against significant losses. Here are two of those options.

As well, in the Supplement on page 119, we discuss the extent and frequency of major declines and the time needed to recover those losses.

Cisco Systems is a pioneer in computer networking and has stayed a market leader by successfully adapting to change.


For example, in 2015, the company—then focused on equipment—decided to shift to providing network software. The move reduced Cisco’s dependence on hardware sales, which tend to be cyclical. Another key shift for the company was its decision to sell its software as a recurring subscription rather than as a one-time purchase. That has further stabilized its revenue stream.



Now, the company is in the middle of another transition, as it incorporates artificial intelligence (AI) tools into its products. This particular shift lets Cisco’s clients process increasingly large amounts of data to prevent costly cyber incidents.

We think investors will profit most—and with the least risk—by buying shares of well-established companies with strong business prospects and strong positions in healthy industries. You should also take care to spread your money out across the five main economic sectors: Manufacturing & Industry, Resources, Finance, Utilities, and Consumer.