What’s up guys, it’s wiz.
Welcome back to the channel. If you are new, I am a Canadian investor. I cover a whole lot of information about investing in Canada and do research into our Canadian market. I dive into growth investing, dividend investing and Canadian small caps / penny stocks. Today, I will showcase 3 top Canadian ETFs that beat the high inflation we are seeing currently. In the long run these ETFs that I will go over and similar ones to them, are your number #1 resource to combat and to stay above high inflation. For new investors, you need to join Wealthsimple Trade if you are looking to start investing and live in Canada. If you use my link in the description to join Wealthsimple, you get 2 free stocks worth up to 4500$ so do not miss out.
Inflation is running wild this year. 2 weeks ago, StatCan released the official inflation report for May, which showed a 7.7% increase in the price level. The CPI increase was well ahead of estimates, which called for a 7.3% rise in prices. In this environment, Canadians are feeling it and it’s obvious through its high media coverage and basically its overall effect on our daily life. Salaries aren’t going up as fast as prices, and people are having to cut corners to make ends meet. It’s a tough time, for sure. But there is a way to protect your savings. By investing in diversified index funds, you enjoy a slice of the profits earned by companies raising prices this year. This doesn’t guarantee you’ll get great returns. But it gives you a decent shot at a return that exceeds what you’ll earn in a bank account. So, I will explore three exchange-traded funds (ETFs) to buy in order to combat the effects of high inflation.
Let’s start off with iShares S&P/TSX 60 Index Fund (ticker symbol XIU) which is related to large-cap TSX stocks. XIU is a Canadian ETF that holds the largest 60 Canadian stocks by market cap. I bought this ETF fairly early in my investing career and never looked back. With 60 stocks, it has plenty of diversification. It also has a low fee (an MER of 0.16%) and high liquidity. Perhaps more importantly, it has a lot of stocks in it that serve as inflation hedges. You may have heard that the price of oil is rising this year. That’s true, and oil stocks are among the few categories of equities that are outperforming. Since Canada has a lot of energy companies, you get ample exposure to the sector via XIU. It’s a great fund for investors to consider looking for inflation protection.
Next I will be talking about Vanguard S&P 500 Index Fund Canadian Hedged (ticker symbol VFV) is a fund of U.S. stocks. There is a Canadian version of the fund, VFV, which has a higher fee than the U.S. version but better tax treatment. The U.S. stock market doesn’t have as many direct “high-inflation-winner” plays as the Canadian stock market does. It does, however, have a lot of tech stocks that have been beaten down below fair value. Many top U.S. tech stocks now trade at market prices below the value of their future cash flows in a DCF model, assuming 0% growth. Such stocks have fallen this year, of course, but their high growth and cheap valuations make them worthy picks for the future.
Last but not least, we have BMO Covered Call Canadian Banks ETF (ticker symbol ZWB). This is an ETF that invests exclusively in financial stocks. ZWB has been designed to provide exposure to a portfolio of Canadian banks while earning call option premiums. The Fund invests in securities of Canadian banks, and dynamically writes covered call options. Banks don’t directly profit off of high inflation, but they can profit off of interest rate hikes. When interest rates rise in tandem across the yield curve, banks see their profit margins increase. It isn’t as simple as saying that when interest rates go up, bank profits go up: the interest rates need to go up on the long end of the curve as well as the short end. But in the long run, banks are among the few categories of equities that are at least not damaged by high interest rates.
Hope you guys enjoyed these 3 Canadian ETFs, some safe and good income producing stocks. Like I have mentioned, if you see financials and banks in general going up and outperforming then ZWB would be a good ETF to start with, VFV is also an excellent choice to get that amazing diversification of the US stock market with the top 500 US companies. Please watch my previous videos on Canadian stock recommendations and let me know of any Canadian stocks you want me to look into and give my opinion on. Let me know in the comments, since I really want to expand my knowledge in the Canadian market, and you also expand your own knowledge by asking questions. It is a win-win situation. If you did enjoy this video, leaving a like really helps grow the channel! Thanks for watching, I’ll see you guys in the next video!