Global Stock Investing in One ETF for Canadian Investors
The power of stock investing is spectacular. It’s the cornerstone of building wealth for millions of investors worldwide. Equity investments make billionaires so rich they build rockets to fly into space. It’s also how your unassuming neighbor with an average job became a millionaire. You’d be surprised how many ordinary people are practicing stealth wealth.
Equities provide the best long-term historical returns of any publicly traded asset class. So choosing to invest in stocks is a no-brainer for building wealth. It’s so easy and passive with investment options like XEQT.
Can’t decide how to divide your equities between markets? Are you struggling to decide how much to invest domestically vs internationally? XEQT takes the guesswork out of the equation and makes that decision for you. When you buy shares of XEQT, you get instant global diversification. You can instant diversification to Canada, the US, and International Stocks.
What is XEQT?
XEQT is an All-In-One ETF managed by BlackRock Canada. This ETF invests in only stocks with a long-term strategic equity allocation of 100%. As an ETF, this fund is priced and traded throughout the day on the Toronto Stock Exchange (TSX). XEQT is traded in Canadian dollars.
The goal of XEQT is to provide long-term growth by investing in a global basket of stocks. With one ETF investors get exposure to Canadian Stocks, United States Stocks, Developed Markets International Stocks, and Emerging Markets Stocks. This ETF is a simple and low-cost way to invest in a diversified portfolio of regions across the globe. The portfolio is continually monitored and automatically rebalanced by BlackRock. The target allocation by geography is handled for you and rebalanced as needed. This ETF does not invest in fixed-income securities or bonds. This ETF can and does maintain a small cash allocation of USD dollars and Canadian dollars.
XEQT ETF details
- Target Equity Allocation: 100%
- Target Fixed Income Allocation: 0%
- Inception Date: Aug 7, 2019
- Number of holdings: 4
- The number of underlying stock holdings: 9,581
- Distribution frequency: Quarterly
- Management Expense Ratio (MER): .20%
iShares XEQT
- XEQT is an iShares ETF product managed by BlackRock Canada.
- This ETF invests in 4 other iShares ETFs
- iShares is owned by BlackRock, a global investment manager, and fiduciary.
XEQT MER
- Management Fee =0.18%
- Management Expense Ration (MER) = 0.20%
A 0.20% expense ratio means you pay $20 per year in fees per $10,000 invested. This expense ratio is competitive with similar funds offering the same product. It’s 400 basis points cheaper than Vanguard’s competitive product, VEQT.
XEQT’s MER of 0.20% includes the fees of the underlying holdings. Buying XEQT vs the underlying holdings will increase the management fee by about 2x. It will cost you about 0.08% in fees to invest directly into the underlying ETFs at the target allocation of XEQT. However, you’ll need to manage the rebalancing of your portfolio over time. Execution risk and cost of not rebalancing will be higher than the minimal fee difference of 200 basis points.
XEQT price
This ETF is priced in CAD and trades on the Toronto Stock Exchange. Get a real-time price quote from Yahoo! Finance.
XEQT returns
Launched in 2019, this fund has a 10.60% CAGR. With less than a 3-year lifespan, it’s way too early to establish a historic performance. But, the underlying indexes have been tracked for decades.
Check out what people are saying about this ETF on Twitter $XEQT
XEQT holdings
This fund invests in four ETF index funds. Each ETF provides equity exposure to a strategic stock market asset class. US Stocks, Candian Stocks, the MSCI EAFE Index, and Emerging Market Stocks. The fund also has a small cash balance held in USD and CAD.
Here are the 4 holdings and 2 cash positions for XEQT:
- iShares Core S&P Total U.S. Stock Market ETF (Ticker: ITOT)
- iShares Core S&P/TSX Capped Composite Index ETF (Ticker: XIC)
- iShares Core MSCI EAFE IMI Index ETF (Ticker: XEF)
- iShares Core MSCI Emerging Markets ETF (Ticker: IEMG)
- USD Cash
- CAD Cash
Here’s the current allocation by position:
- U.S. Stock Market Index: 45.79%
- S&P/TSX Index: 25.99%
- EAFE Index: 23.59%
- Emerging Markets Index: 4.59%
- USD Cash: .13%
- CAD Cash: (.10%)
Since XEQT invests only in stocks, the price volatility will be high over short-term horizons. Each underlying stock market index will commonly see 10% – 20% drawdowns during bear markets. Stock market corrections are more common than you think. The US Stock market saw a 10% pullback in 10 of the last 20 years. During that time period, 2002 – 2022, the stock market returned a CAGR of 8.93%. A $10,000 initial investment would have grown to 5.6x to over $56,000 over that 20 years period.
It’s time in the market, not timing the market that matters. Don’t be scared by volatility just continue to hold your stock investments. In fact, the longer you hold onto stocks the higher the probability that you’ll earn a positive return on your investment. I find this fact compelling and comforting.
You don’t see a 100% data point often when studying stock data. But, here it is! This historical analysis from Fisher Investments shows that holding stocks for +16 years generated a positive return 100% of the time! Statistical data proves time in the market is the key to success.
Asset allocation
The long-term strategic allocation is 100% equities or stocks. The current balance:
- Equities = 99.81%
- Cash = 0.19%
Here’s the asset allocation by asset class:
- Canadia Equity = 25.64%
- U.S. Equity = 45.57%
- International Equity = 28.34%
Here are the Top 10 geographies
- United States = 45.78%
- Canada = 25.75%
- Japan = 5.55%
- United Kingdom = 3.74%
- Switzerland = 2.48%
- France – 2.22%
- Australia = 1.97%
- Germany = 1.82%
- China = 1.29%
- Netherlands = 1.13%
XEQT stock holdings
When you invest in XEQT, you own stock in 9,581 underlying holdings! That’s pretty amazing. The underlying indexes are market cap-weighted. Therefore, the most significant underlying holdings are the most valuable publicly traded stocks in each index. Stocks from the US and Canada dominate the top 10.
Here are the Top 10 Underlying Holdings:
- Apple
- Microsoft
- Royal Bank of Canada
- Toronto Dominion
- Amazon
- Enbridge
- Bank of Nova Scotia
- Brookfield Asset Management
- Alphabet
- Tesla
Picking winning stocks is hard. Actively managing a portfolio of individual stocks is really hard. In fact, 83% of professionals, those managing actively traded mutual funds, can’t beat the S&P 500 index over a 10-year period!
83%! Think about that for a minute. These are professional money managers who earn millions of dollars researching and picking stocks. They have billions of dollars of research at their figure tips and what’s the result? Most of them can’t beat a simple buy-and-hold index fund. Like XEQT’s largest underlying holding, ITOT.
XEQT dividend
XEQT pays dividends quarterly. The current dividend yield of this ETF is ~2.33%. This dividend yield appears close to recent historical averages. The dividend yield of XEQT will change based on the valuations of the underlying holdings. For example, when valuations are high in US stocks, which comprise +40% of this fund, the dividend yield will be lower. Conversely, when valuations are low for Candian and International stocks, the dividend yield will be higher.
XEQT dividend date
Dividends are paid quarterly by the ETF. The distribution dates are very close to the end of each fiscal quarter. For a historical record of distributions, check out the XEQT product page from RBC Global Asset Management.
XEQT vs VEQT
BlackRock and Vanguard dominate the ETF marketplace. Between the two companies, they manage over half of the money invested in ETFs. That’s about 5 trillion dollars with a T!
VEQT is an All Equity ETF from Vanguard. It’s a very similar fund with the same components. It invests in 4 index ETFs that track the US, Canadian, EAFE, and Emerging market indexes. Let’s review the subtle differences between the two funds.
Fees
- XEQT MER = 0.20%
- VEQT MER = 0.24%
Allocation by asset class:
- XEQT
- Canadia Equity = 25.64%
- U.S. Equity = 45.57%
- International Equity = 28.34%
- VEQT
- Canadia Equity = 30.72%
- U.S. Equity = 42.14%
- International Equity = 26.51%
XEQT has a higher exposure to the US and International Equities. No one knows if the US outperformance will continue or if elevated valuations will cause the US to underperform. The US returns may be the factor that causes these ETFs to perform differently in future years.
The iShares ETFs by Black and Vanguard ETFs are both great options for ETF investing. Fees and low, tracking errors are low, and both ETFs rebalance automatically to maintain target asset allocations. In the grand scheme of things, deciding between these two ETFs will not make or break your journey to financial independence. Increasing your income and savings rate are critical. Take that savings and invest in either XEQT or VEQT. Rinse and repeat for 20 years and you’ll be doing just fine.
How to buy XEQT
This iShares ETF is available through all major online brokers in Canada. In addition, international investors can also access this product through global trading platforms like Interactive Brokers.
Here are two popular discount online brokers that allow investors to buy XEQT
Technology and competition changed the investing landscape forever. Trading fees are a thing of the past. If you’re paying any amount of money to buy or sell ETFs, find a different broker. There are so many great companies and platforms that make investing and managing your portfolio easy and free.
Bottom Line
XEQT is on a shortlist of Best Canadian ETFs. It’s a one-stop-shop fund that solves the equity portion of your portfolio. You get instant access to the four major stock asset classes with a low fee and automatic rebalancing. XEQT also addresses a common issue for equity investors. Home country bias. Investors in every country in the world tend to overweight their country’s index in their investment portfolio.
To achieve financial freedom, you must earn and invest as much as possible until it hurts. So, simplify your investing life and spend more time focusing on making and saving money. With one simple ETF, you can invest in a globally diversified portfolio of stocks. No rebalancing is required! BlackRock Canada handles that for you at a price lower than most Robo-advisor services in the market.
The road to financial independence is long and if you’re aiming for FatFIRE you’ll need a sizable portfolio. Why not consider an investment that does most of the heavy lifting for you? Scaling your income is harder than investing and requires more brainpower. Investment choices like XEQT are really compelling options to make investing near effortless.
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