Although the stock market has remained strong this year, many stocks are overvalued, and recent SpaceX IPO gives investors a prime example of that. A crash or at least a correction may be coming later this year. And a good way to reduce your risk in the market is by looking at consumer staples and companies that produce essentially day-to-day goods, including food, hygiene products, and common household items. There are all things that are in demand regardless of economic cycle.
One exchange-traded fund (ETF) that focuses on this area is the BMO Global Consumer Staples Hedged to CAD ETF (TSX:STPL). This ETF provides diversified exposure to top-tier international consumer staple powerhouses, including household names like Procter & Gamble, Nestlé, and Unilever. By bundling these resilient giants into a single fund, it significantly mitigates the risk associated with holding individual stocks.
A standout feature of this ETF is its currency hedging. Investing globally usually exposes Canadians to foreign exchange fluctuations, which can erode returns even if the underlying stocks perform well. By hedging back to the Canadian dollar, this fund completely eliminates that extra layer of volatility, ensuring investors get the pure performance of the underlying global assets.
Furthermore, consumer staples are renowned for their steady cash flows and reliable dividend payouts. This fund yields around 2.2%, and with some excellent dividend stocks in its portfolio, it can offer a consistent stream of regular cash flow that can be vital for a Tax-Free Savings Account or long-term retirement portfolio.
In an era of sky-high valuations and macroeconomic unpredictability, prioritizing capital preservation is a highly effective strategy. With its low-volatility profile, built-in currency protection, and dependable dividend yield, this BMO fund may be an excellent one to add to your portfolio right now, especially if you're worried about the market.
