A Steady Income-Generating ETF To Buy And Hold Amid Market Volatility

Do you want a safe income-generating investment to hang on to, and not worry about right now? One option to consider is the BMO Aggregate Bond Index ETF (TSX:ZAG).

With a high yield of around 3.4%, ZAG offers a compelling income stream for investors who want stable and dependable recurring income. ZAG tracks the FTSE Canada Universe Bond Index, providing diversified exposure to Canadian federal, provincial, and corporate bonds. It has over 1,600 holdings, with an average duration around 7 years. This means while it remains sensitive to interest rate movements, it also stands to benefit from any decline in yields, pushing up bond prices. With rate cut expectations building for late 2025, ZAG offers an attractive hedge for investors anticipating a softer monetary stance.

Its low management expense ratio of 0.09% enhances its appeal, especially when compared to actively managed fixed income alternatives that often charge significantly more. Moreover, ZAG distributes monthly income, providing consistent cash flow-an essential feature for those who rely on fixed income for expenses or retirement planning.

While ZAG won't deliver equity-like growth, it plays a stabilizing role in a balanced portfolio, especially during equity market pullbacks. With Canadian bond markets already pricing in a pause-and potentially the start of an easing cycle-it could offer both income and price appreciation upside.

ZAG suits conservative investors, retirees, and those seeking core fixed income exposure with minimal fees. It's also a sound choice for portfolio diversification in uncertain economic conditions, offering a balance of income and downside protection.

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