A Simple Canadian Bank ETF to Buy With $1,000 and Hold Long-Term

If you’re looking to get broad exposure to Canada’s stable and profitable banking sector without picking individual stocks, one category of exchange-traded funds (ETFs) stands out as a straightforward long-term holding. Canadian banks are known for large market share, recurring revenue from lending and deposits, and decades-long histories of dividend payouts — qualities many income and core growth investors like. An ETF that holds a basket of these banks lets you capture that sector’s strength in one position.

The Canadian banking sector is dominated by the “Big Six” — Royal Bank, Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and National Bank of Canada — all of which feature prominently in diversified bank ETFs. Instead of trying to decide which individual bank will outperform, owning an ETF spreads your dollar across the whole group, which reduces company-specific risk and simplifies your investing. It’s a particularly sensible approach if you want to hold a core position for years or decades with minimal fuss.

One ETF that many investors consider for this purpose is the BMO Covered Call Canadian Banks ETF (TSX: ZWB). This fund holds the six major banks in roughly equal weight and uses a covered-call strategy to enhance income by collecting option premiums on part of its holdings. That strategy pushes the fund’s yield materially higher than a simple buy-and-hold of each bank’s dividends alone, making it appealing for income-oriented investors — especially in tax-advantaged accounts like a TFSA where dividends compound without tax drag.

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The trade-off is that covered calls can cap some upside in strong bull markets, since gains beyond the strike prices may be passed to option buyers. But in moderate growth or sideways markets, the enhanced income often compensates investors well. As a long-term investor who plans to reinvest distributions and ride out market cycles, this extra income stream can build your position more quickly.

Another newcomer in the Canadian bank ETF space is the BMO Equal Weight Banks Index ETF (TSX: ZEB). This ETF doesn’t use covered calls but still gives diversified exposure across the same six banks, making it a core financial sector holding with a lower fee and more traditional equity performance pattern.

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In either case, a diversified bank ETF is a practical way to gain exposure to a bedrock part of the Canadian economy with a $1,000 starter position and hold it for the long haul, benefiting from dividends, sector growth, and the stability of an essential industry.