The Canadian ETFs Most Investors Are Overlooking Right Now

A large portion of Canadian-listed exchange-traded funds (ETFs) that investors gravitate toward tend to focus on U.S. stocks.

Most of the time that means funds tracking well-known benchmarks such as the S&P 500 or the NASDAQ 100. These ETFs have become extremely popular because U.S. equities have been strong performers for many years.

However, buying these benchmarks in 2026 can leave investors heavily tilted toward growth companies and the technology sector.

That is simply a consequence of how market-cap weighted indexes work. The companies with the largest market values receive the biggest allocations, and right now those companies happen to be large technology and growth names.

There is nothing inherently wrong with that approach, but it does create a concentration risk.

If you would prefer to diversify away from that growth-heavy exposure, there are a few more contrarian ETFs that receive far less attention. Here are two options from BMO Global Asset Management that investors may want to consider.

Low volatility U.S. stocks

The BMO Low Volatility U.S. Equity ETF (TSX:ZLU) takes a very different approach from traditional U.S. equity benchmarks.

Rather than weighting companies by market capitalization, the fund focuses on minimizing volatility. It uses a rules-based process to select the 100 least volatile stocks based on beta each November, with a rebalance in May.

The end result is a portfolio that looks quite different from the S&P 500.

Defensive sectors dominate the allocation. Utilities represent about 20% of the fund, while healthcare accounts for roughly 18%. Consumer staples, another traditionally stable sector, makes up around 13%.

These industries tend to experience less dramatic price swings during economic cycles, which is why they often appear in low volatility strategies.

Despite flying somewhat under the radar, ZLU has grown into a sizeable ETF with approximately $2.25 billion in assets under management. It also remains reasonably priced for a rules-based active strategy with a 0.33% management expense ratio.

U.S. value stocks

Investors who prefer to focus on potentially undervalued companies may want to look at the BMO MSCI USA Value Index ETF (TSX:ZVU).

Unlike the previous fund, ZVU is a passive ETF that tracks the MSCI USA Value Index.

This benchmark identifies value stocks using three fundamental metrics: price-to-book value, price-to-forward earnings, and enterprise value relative to operating cash flow. Companies that score well on these measures are included in the index.

The resulting portfolio is smaller than the S&P 500, with about 148 holdings. However, its sector composition still resembles the broader U.S. market, with technology remaining the largest sector at around 38%.

The difference lies in the types of companies selected. Within each sector, the index tends to emphasize more traditional and established firms rather than the high-growth names dominating the major benchmarks.

ZVU carries a 0.33% management expense ratio and currently offers a distribution yield of about 1.5%.

The post The Canadian ETFs Most Investors Are Overlooking Right Now appeared first on The Motley Fool Canada.

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Fool contributor Tony Dong has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.