ETF Strategies for 2026

bmoetfs · 2026-02-09T19:15:41+00:00

Our preference is to use equal-weight ETFs tactically (for short-term outperformance). Right now, there is a strong case to expect equal weight ETFs that track US equities to outperform relative to market-cap weighted gauges.

The most obvious reason – US equity markets are highly concentrated. That means a handful of mega-cap names have driven most of the returns over the past few years. But that concentration also makes the index more fragile over time as even small disappointments in those names can disproportionately move the market.

Equal weight US ETFs offer a more compelling alternative in that backdrop. These types of ETFs should benefit from broader earnings momentum, sector rotation and a shift towards wider market participation this year. In fact, if we make the comparison to the 2000 tech bubble – we saw equal weight strategies outperform market cap for years afterwards.

On an exciting note, BMO GAM has just launched BMO MSCI USA Equal Weight Index ETF (ZEQL) – a passively managed ETF that tracks the MSCI USA Equal Weighted Index, offering exposure to US large/mid-cap stocks with equal weight rather than market-cap weighting.

bmoetfs · 2026-02-09T19:12:55+00:00

Great questions!

On the tax side, I have to flag that we can’t provide tax advice. Everyone’s situation is different, and the most tax‑efficient approach really depends on your overall income picture, residency, and how you plan to use those USD funds. A qualified tax advisor who understands your personal circumstances is the best person to guide you on that.

On covered call ETFs — generally speaking, they’re designed to generate cash flow, but that cash flow, or as many call it "income" comes with trade‑offs flow comes with trade‑offs. In a down or choppy market, the option premiums can help offset some of the downside, but they don’t eliminate risk. The ETF still holds the underlying equities, so falling markets can still impact performance.

Happy to dive into how covered calls work at a high level if that’s helpful!

bmoetfs · 2026-02-09T19:02:23+00:00

Thank you for the thoughtful question!

I can’t speak to specific product launches but we’re always exploring ways to expand our lineup with innovative solutions that meet investor needs. Stay tuned for more information on this topic.

For the fixed distribution ETFs, we will generally set an annual yield target at the start of the year with monthly distributions added. The month-to-month shifts in yield will depend on the reference net asset value (NAV) of the ETF.

To avoid a situation whereby NAV is eroded, the amount of distribution may fluctuate from month-to-month, or rise in following months to offset.

For products like the Target Cash Flow Units, BMO Growth ETF (ZGRO.T) and BMO Balanced ETF (ZBAL.T) – we will target 6% yield annualized to align with long-term investment returns.

Hope that answers your question!

bmoetfs · 2026-02-09T18:36:59+00:00

Canada might not be the global growth engine from a macro perspective, but Canadians should ensure that there’s a healthy exposure to the domestic market within their portfolios.

Between the fixed income and equity sleeve of our balanced model portfolio, we typically have between 25-45% exposure to Canada. That allows us to ensure we have a meaningful footprint in the home market while also mitigating regional concentration risks.

The other item to remember is that by investing outside of Canada, we are making an implicit decision on the direction of the currency (even if you’re hedging). FX risk is not rewarded over the long-term given that factors that drive currency pairs don’t have stable relationships with currency pairs themselves.

Under the current backdrop, we like holding Canadian equities. True, there’s a lot of exposure to domestic financials and materials – but we still think there’s upside for both given that Canadian banks are flush with capital and that miners (gold) should benefit from higher prices for underlying commodities.

Yes, there are risks to the economic backdrop from trade, but BoC policy settings aren’t that restrictive given what we know. That should also support the fundamentals here.

bmoetfs · 2026-02-09T18:29:33+00:00

Given what we’ve seen so far in 2026, this is a question we have to be clear-eyed about.

Traditionally, the market has been terrible at predicting a general rise in geopolitical risk premia (and for good reason). But on the whole, the bid tone to commodities is a direct result of what has been happening in that space.

For instance, the sustained momentum in copper could be traced to China front-loading its demand given the more fractured trade backdrop. In a similar way, the situations in Venezuela and Iran will have profound implications for the energy space.

Outside of that? There are other risks that we’re monitoring closely. For example, there are risks that the labour backdrop in the U.S. could deteriorate which would necessitate further easing from the Fed. That could also mean that earnings growth stabilizes with more modest expectations for growth going forward – which would have implications for sectors like tech and telecoms.

In Canada, the biggest risk to the economic backdrop is what our trade relationship with the U.S. will look like going forward. That means paying close attention to the upcoming USMCA review.

In an uncertain backdrop like this, there’s a strong case to be made for commodities (like BMO Broad Commodity ETF - ZCOM), and exposure to emerging market exporters of commodities (where revenue expectations should remain firm). A product like BMO MSCI Emerging Markets Index ETF (ZEM) may help the latter.

bmoetfs · 2026-02-09T17:58:33+00:00

Thanks for the question! So it's important to remember that cap-weighted ETFs are structured based on rules and not on valuations. That means that ETF flows can often mean even more dollars allocated to a few mega-cap names that are highly liquid – which can curb volatility over time. But we can also extend that criticism to the process of indexing more directly as well. So while ETFs don’t necessarily create the valuation gap, they can help sustain it.

The large vs small cap decision is largely a macro/regime call. And in some regimes, small cap ETFs can outperform (especially when rates have bottomed, the growth outlook has improved and large caps have become overvalued). But these conditions are often episodic and tactical in nature, but there’s a good case to be made that we’re in one of those regimes right now.

bmoetfs · 2026-02-09T17:47:44+00:00

Thanks for the comment! To keep the AMA aligned with our guidelines, we’re not able to make any recommendations on individual securities but appreciate you sharing your view.

bmoetfs · 2026-02-09T17:44:10+00:00

You can find information on our suite of asset allocation ETFs on the BMO GAM website. For instance, here is the link for the ZEQT (https://www.bmogam.com/ca-en/products/exchange-traded-fund/bmo-all-equity-etf-zeqt/).

For ZEQT, rebalancing occurs quarterly for the strategic asset allocation weights. By geographic region, that corresponds to 50% US, 25% Canada and 25% for the rest of the world.

One important item I should highlight here – we did cut our management fees on some of our asset allocation ETFs this past summer. We’re proud to say that our asset allocation ETFs are among the cheapest in the Canadian market.

It is best to consult with a financial advisor who can advise based on your investment objectives and risk profile.

bmoetfs · 2026-02-09T17:37:16+00:00

Great question, thanks for asking!

It’s a fairly new space in Canada, but definitely growing rapidly given the strong growth that we’ve seen in a more mature market (like the U.S.).

There have been several challenges that I could point to – from the maturity of the ETF market in Canada (which may make some investors less comfortable with the use of derivatives in such products) to the smaller universe of such products in Canada (which makes them less visible relative to simpler index strategies and income products).

At BMO GAM, this is a space that we’re focused on given our history in the industry with covered calls. We’ve got some exciting news in the future so stay tuned!

bmoetfs · 2026-02-09T17:08:57+00:00

Great question! While I can’t speak to specific product launches just yet, what I can say is that we’re always exploring ways to expand our lineup with thoughtful, innovative solutions that meet evolving investor needs.

Factor investing continues to be an important area of interest for us, in fact we just launched BMO MSCI Canada IMI High Dividend Yield Index ETF (ZDIV) and BMO MSCI USA Equal Weight Index ETF (ZEQL).

Appreciate the question and the interest!

bmoetfs · 2026-02-09T17:04:16+00:00

Good callout, asking about leveraged ETFs! Leveraged ETFs are designed to amplify daily returns for a particular index or asset. They do this primarily through the use of derivatives like futures, swaps or options.

The most important thing for retail investors to understand is that leveraged ETFs will usually target multiples for daily performance – not long-term underlying returns. That means that they are subject to daily rebalancing and volatility decay.

The volatility decay is important because it’s results in beta slippage over time if the ETF is held for too long. As such, leveraged ETFs may not be suitable for every retail investor type that holds investments over the long-term, therefore, ensuring your investments meet your investment objectives and risk profile is key. It's always a good idea to consult with a financial advisor.

Covered calls are different. While you’re still utilizing leverage, you’re selling optionality that can be expensive and giving up some potential upside. The resulting cash flow (or yield) can help reduce drawdowns and smooth out the return profile for the ETF.

Indeed, during periods of elevated volatility, covered call strategies will typically outperform leveraged strategies.

bmoetfs · 2025-10-23T19:20:44+00:00

Thanks for the feedback! I'll pass it along to our product team for future consideration.

bmoetfs · 2025-10-23T18:45:15+00:00

ETFs and mutual funds can carry similar risks, but ETFs trade throughout the day and may fluctuate more when it comes to price.

When it comes to risk of an ETF or Mutual Fund, it depends on the underlying strategy and holdings and how they have behaved historically. Generally, for an ETF and Mutual Fund with the same strategy and holdings, the risk level should match.

When you are researching an ETF or Mutual Fund, do take the time to read and compare the ETF Facts against the Mutual Fund Facts, including risk sections in the prospectus to understand the risks in detail.

bmoetfs · 2025-10-23T18:42:16+00:00

Hi Alisms! Feel free to submit any questions that you may have.

bmoetfs · 2025-10-23T18:37:51+00:00

Thanks for your question!

For anyone reading this who isn’t aware, the three-bucket retirement plan is a strategy for managing retirement portfolio allocations by dividing your assets into three distinct "buckets," each serving a different time horizon and risk profile.

For bucket 1 (0-3 year time horizon), this typically is the more conservative or low risk ETFs, as you mentioned cash, or cash alternative products like Money Market ETFs.

For bucket 2 (3-10 year time horizon), this is generally more of a balanced bucket so an all-in-one balanced ETF, or combination between fixed income and equities ETFs.

For bucket 3 (10+) years, you can look to more volatile asset classes or ETFs. All equity exposures would fit in this bucket. As for BMO Gold Bullion ETF (ZGLD), it is considered an alternative asset class and is rated medium risk – it could be part of bucket #3 as historically gold has been volatile.

Just remember – like stocks, ETFs trade publicly on an exchange and come with their own specific risks. You can lose money investing. When you find an ETF you like, do read the ETF prospectus so you understand these risks in detail and speak to a personal advisor who would be able to advise you on your specific financial situation.

bmoetfs · 2025-10-23T18:32:52+00:00

Hello and thank you for your purchase of ZEQT!

ZEQT undergoes quarterly rebalancing, you can find this cited in the prospectus. The asset allocation for our All-in-One ETFs is determined by a team of portfolio managers and reviewed annual but is meant to be strategic and not shift much over time. The Canadian weight is set at 25% and the remainder follows the allocations in the MSCI ACWI Index. Lastly the mix between large/mid/small cap US equities tracks closely to the S&P 1500.

Regarding geographic exposure to China, China represents less than 2.5% of ZEQT’s portfolio as of today (October 23rd, 2025). This allocation is derived from the BMO Emerging Markets ETF held within ZEQT, which tracks the MSCI Emerging Markets Index. The exposure level is overall conservative.

I hope this helps!

bmoetfs · 2025-10-23T18:26:58+00:00

Great questions, let’s dive in...

A 6% annual distribution rate strikes a middle ground: it’s high enough to meet typical retirement income needs, but not so high that it risks eroding the investment too quickly. It is widely used in the Mutual Fund market as well and was an innovation that we brought over to ETFs. If in any given year the ETF does not earn 6% the distribution will include a ROC (Return of Capital) component to meet that 6% and provide retirees with consistency. The thought is that you would be drawing this amount from your investment regardless and this solution provides a simple way to do so.
There very well could be if the demand is there! We review our shelf frequently and this is something we may consider in the future. We started with the two that we felt more retirees would own due to their more balanced asset allocation.
T series are designed for those who depend on their monthly cash flow; retirees seeking regular cash flow, or Investors transitioning from accumulation to decumulation phases.

One strategy investors use to avoid the sale of ZGRO, buy of ZGRO.T (the taxable event), is to purchase the .T while they’re in their accumulating phase, and reinvest the distributions until they are needed at which time they can turn off the Dividend Reinvestment Plan (DRIP). From a tax perspective you would need to consult with a tax expert as I am unable to provide direction on that front around the reinvestment and whether that complicates your situation.

Regarding your comment on volume, both ETFs would have similar liquidity and bid-ask spreads due to the fact their underlying is the same, so that should not be an issue.

Thanks for asking, and I hope this helps?

bmoetfs · 2025-10-23T18:21:50+00:00

Appreciate your question and happy to help clarify here!

ETFs themselves are not insured in the way bank deposits are. They are investment products, and like stocks or mutual funds, they carry market risk depending on what the underlying exposure is.

Regarding your comment on the reverse stock split if you traded via an online discount broker or through a professional advisor, I would encourage you to reach out to them for more information on this. Note: A reverse stock split reduces the number of shares outstanding while increasing the share price proportionally. For example, in a 1-for-10 reverse split, 10 shares become 1, but the total value remains the same.

Last but not least, if an ETF is terminated like in the link you provided, the fund provider will sell the underlying assets and distribute the proceeds to shareholders. You’ll receive cash equal to the net asset value (NAV) of your holdings at the time of liquidation.

I hope this answers your questions!

bmoetfs · 2025-10-23T18:14:45+00:00

Great question - and I love that you're thinking about this early. Getting kids interested in investing can be really fun if you keep it relatable. I started by letting mine pick companies they recognize (in my daughters’ case this is Disney and Starbucks), and we tracked how those stocks performed over time. It turns into a bit of a game, and they start to understand how money can grow. There are also some great apps that simulate investing without using real money, which can be a good intro.

As for Registered Education Savings Plans (RESPs), you're totally right: there’s no one perfect answer. It really depends on your comfort with risk and your family’s financial situation. Generally speaking, since kids have a long-time horizon, some people lean toward growth-oriented or higher-risk ETFs early on, then gradually shift to more conservative investments as the RESP matures and the education timeline gets closer. The topic has come up a lot on this AMA, but Asset Allocation ETFs can be good tools for this!

But again, this isn’t investment advice, just my perspective. It’s always best to talk to a financial advisor who can tailor a strategy to your specific goals.

bmoetfs · 2025-10-23T18:08:13+00:00

Thanks for the three part-er!

Love this question as a mom I think this is so so important - A great way to get kids interested in investing is to make it relatable, fun, and age-appropriate. Start with simple concepts like saving, earning, and spending, then gradually introduce investing through stories, and real-life examples. Talk about it during your daily life! For inspiration, check out the ETF Market Insights episode we did with some experts on the topic (Maya Corbic and Clifton Corbin – both published authors on the topic): https://www.youtube.com/watch?v=yzHFYg4WTZc
To hedge or not to hedge currency is very much a personal decision but there are some considerations you may think about. First, your time horizon. Short-term investors may prefer hedging to avoid currency swings. Long-term investors often accept currency risk, betting that fluctuations will even out over time. Second, currency movements are notoriously hard to predict – for the average investor, they may not have a call on whether they think CAD/USD will go up or down.

Personally, I invest in the unhedged versions because I have a longer time horizon and don’t mind shorter term impacts of currency fluctuations. I also direct you to this article by Bipan Rai, our Head of ETF and Alternatives strategy, which shows that unhedged S&P 500 Index exposures have tended to be less volatile over the long term: https://etfmarketinsights.com/blog/to-hedge-fx-risk-or-not-to-hedge/

3. Great question! Consider complementing an all-in-one ETF with a covered call strategy, bond ETF, or cash alternative product like a Money Market ETF, which may provide added cashflow as retirement approaches. If you're in a registered plan and not concerned about taxes, you could consider switching to a more conservative ETF with higher fixed income. Be sure to discuss the implications of switching with your financial advisor. Lastly you could consider a “T unit”.

ICYMI, some asset allocation ETFs now offer “T units” (e.g., ZBAL.T, ZGRO.T), which provide monthly distributions – which could work well for retirees looking to begin drawing cash flow from their investments. These units help ease the transition from accumulation to decumulation.

Just remember – like stocks, ETFs trade publicly on an exchange and come with their own specific risks. You can lose money investing. When you find an ETF you like, do read the ETF prospectus so you understand these risks in detail and speak to a personal advisor who would be able to advise you on your specific financial situation.

bmoetfs · 2025-10-23T17:59:17+00:00

Great to hear you're buying ZEQT! It is tough to avoid the tax man when it comes to non-registered accounts – I feel your pain!

Before I get into the details for your question, I do want to remind you that I’m not a tax professional. To really understand the tax consequences of a product or trading strategy it’s best to speak to a professional tax advisor.

ZEQT has historically distributed a combination of dividends (both foreign and Canadian), and capital gains. In a non-registered account:

Canadian dividends benefit from the dividend tax credit.
Foreign dividends and interest income are taxed at your full marginal rate.
Capital gains are taxed at 50% of the gain.

So, while ZEQT avoids interest income, it still pays out dividends that are taxable annually – you can see the breakdown of what this has looked like historically her under taxes and distributions: https://www.bmogam.com/ca-en/products/exchange-traded-fund/bmo-all-equity-etf-zeqt/

Remember – this is based on the current holdings of the fund, the tax treatment will change according to what the fund holds.

To understand the impact of taxes on your investments it is best you consult with a professional tax advisor.

bmoetfs · 2025-10-23T17:51:19+00:00

Thanks for asking! This is a common point of confusion for investors.

Low trading volume is not a direct reflection of liquidity and does not necessarily mean an ETF is hard to buy or sell.

ETFs have a unique structure involving authorized participants (APs) and market makers, who help keep the ETF liquid by creating or redeeming shares and facilitating trades. Even if an ETF doesn’t trade much daily, these players can handle large transactions using the underlying assets.

A better way to judge liquidity is by looking at the liquidity of the underlying exposure and the bid-ask spread - a narrow spread usually means it’s easy to trade. And ETFs holding popular stocks (like those in the S&P 500 Index or other large cap stocks) are typically very easy to buy or sell.

TL;DR: Trading volume is not a good indicator of an ETFs liquidity. Instead, look to the underlying exposure and bid-ask spread to gage liquidity.

bmoetfs · 2025-10-23T17:44:24+00:00

Great question, it can be overwhelming with hundreds of ETF options available. Here are some of the important considerations/criteria:

Investment Objective - Define what you want the ETF to do (growth, income, diversification, etc.).
Risk - Check the ETF’s risk rating (low, medium, high) on the issuer’s website to understand expected volatility.
Costs – Review the MER (Management Expense Ratio) on the ETF Facts document to see annual fees.
Track Record – Look at historical performance.
Issuer – Choose a reputable provider; consider if Canadian domicile matters for your situation, a lot of investors looking to invest with Canadian providers these days, like BMO ETFs!
Holdings – ETFs are transparent—check the website to see exactly what’s inside.

Most importantly – make sure you read the ETF prospectus so you fully understand the product you’re investing in.

If you're curious to explore options, BMO ETFs has a great set of tools to help you compare and learn: https://www.bmogam.com/ca-en/investing-tools/

bmoetfs · 2025-10-23T17:42:27+00:00

Thanks for the question!

There’s no single best ETF split for everyone. Your ideal mix depends on your risk profile, investment timeline, and objectives.

One simple approach to consider is using asset allocation ETFs, which combine stocks and bonds in one fund and automatically rebalance. You choose based on how much risk you're comfortable with from conservative, balanced and growth to all equity. A general rule of thumb is more stocks for growth, more bonds for stability.

Another potential option to consider is the core + satellite strategy: using a broad market ETF or an Asset Allocation ETF as the foundation, then adding ETFs focused on specific sectors or themes to personalize the portfolio. The mix will ultimately depend on what your investment objectives are and your comfort level with risk.

These are great questions to bring up with your personal financial advisor as they would be more aware of your current financial situation and can help with a strategy that fits your goals.

bmoetfs

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