A look under the hood of BMO’s Low Volatility ETF rebalancing.

BMO’s Low Volatilty ETF rebalances twice a year. We’ll have a look at one of Canada’s best performing ETFs. What’s most surprising or encouraging is that even through a major market correction the index is holding steady. There were no stocks removed from the index. There were no additions.

That there is no turnover is a great sign. Even through turbulent times the index found and held companies that continue to meet the requirements of the index methodology.

From last October here’s my review of BMO’s Low Volatility ETF – ticker ZLB.

In that post you’ll see that ZLB has drastically outperformed the benchmark TSX Composite. The recent market correction has not changed that standing.

Here’s a chart on the performance in 2020 to the end of July . As outlined in the above BMO update, the reason for the slight underperformance is due to underweight positions in tech and gold. That was outlined in my update of the Canadian Dividend ETFs.

The changes to sector allocation.

And above is a look of the top ten holdings. We see that the utility Hydro One and Gold royalty staple Franco-Nevada have moved to the top in weighting. We know that gold is on the move, setting new records. It’s not surprising to see another utility in Emera move up along with the grocers – Empire and Metro.

Overall we see a greater move to financials and real estate, at the expense of the total utility holdings.

It has kept its REIT holdings. They consist of H&R, Smartcentres, RioCan and Choice Properties.

Once again, the the low volatility index has a much more balanced sector allocation compared to the TSX Composite. ZLB holds all of the major grocers (that includes the major pharma retail), plus the telcos. ZLB appears to be well positioned for the new normal that may last longer than most might expect.

Here’s the link to the ZLB holdings page.

More on the returns history.

Here’s the low volatility fund vs the TSX from 2015.

And here’s the return history from ZLB inception.

Once again, it is a misdirect to suggest that we have to take on greater risk to generate greater returns. The BMO Low Volatility ETF continues to show its value.

I remain a big fan. The fund could certainly work as the core Canadian position in a comprehensive ETF portfolio. You’ll find more on low volatility options in the MoneySense Best ETFs for 2020.

For help in portfolio construction, investors can also use the popular BMO InvestorLine adviceDirect. As per my review, that is a co-pilot for the self-directed investor.

For those who want a managed portfolio they can go with BMO’s Smartfolio.

Investors can sign up with BMO’s discount brokerage, InvestorLine.

And of course ZLB is also available through all Canadian discount brokerages including Questrade. You can use this Questrade partnership link.

Please feel free to reach out with any questions.

While I do not accept monies for feature blogs please click here for more about Dale and ‘how I might get paid’ disclosures. 

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Thanks for reading.

Dale