ETFs

By Tony Dong, MSc, CETF on March 24, 2025
Estimated reading time: 5 minutes

By Tony Dong, MSc, CETF on March 24, 2025
Estimated reading time: 5 minutes

Broad bond index ETFs haven’t always been there for investors in the past. Here’s a safer alternative if you’re looking for ballast for your portfolio.

The first quarter of 2025 has bucked expectations of a “Trump trade.” Contrary to what many anticipated, U.S. President Donald Trump’s return to office hasn’t been smooth sailing for markets. Back-and-forth tariff threats on key trade partners like Canada and Mexico have created uncertainty for investors, contributing to market volatility.

Year to date, as of March 17, the S&P 500 is down 3.8%, while the tech-heavy Nasdaq 100 has slid even further, dropping 6.5%.

With stocks struggling, you might be eyeing bond exchange traded funds (ETFs) as a refuge from equity risk and a way to diversify a mostly equity portfolio. A popular choice is the BMO Aggregate Bond Index ETF (ZAG)—a diversified option with a low 0.09% management expense ratio (MER).

Did you know these types of bond ETFs aren’t as safe as they appear? Conventional wisdom says bonds offer lower risk and lower returns than stocks, but there are nuances to this rule that most investors overlook when they’re packaged into an ETF.

Here’s what you need to know about how broad bond ETFs like ZAG actually fare under market stress, and my preferred alternative for diversifying a portfolio.

All bonds carry some degree of credit risk, which is the possibility that the........

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