Do you invest in ETFs or Exchange Traded Funds? For most investors, they are the easiest way to get exposure to a large portion of the stock market. They can be cost-effective if they have a low expense ratio, and can even pay you consistent dividends. Warren Buffett himself says that for a majority of people, investing in low-cost index funds is the best way to go. So in this iShares XEQT ETF review 2024 article, we’ll ask the question: Should you be investing in an all-equity portfolio?
The iShares XEQT Core Equity Portfolio ETF is a one-stop shop for owning stocks from markets all over the world. It holds a basket of other iShares ETFs, has a decent expense ratio, and even pays out a quarterly dividend to shareholders.
Is XEQT.TO worth investing your money in? iShares from Blackrock is one of the world’s predominant ETF providers. It has over $2 trillion in total assets under management across over 800 different financial products that are available around the world. It is definitely one of the most trusted names in the financial industry, along with Vanguard. In this XEQT ETF review article, we will discuss some key facts, the top holdings, the fund fees, the recent performance, and if it deserves a spot in your portfolio.
Looking for a Dividend ETF? Read VDY ETF Review: The Best Canadian Dividend ETF?
XEQT ETF Review: What is XEQT ETF?
First things first in this XEQT ETF review: what is XEQT and why should you care? The XEQT ETF was first introduced by Blackrock back in August 2019. This makes it a fairly new ETF, so take the performance data with a grain of salt. Less than one year into this ETF’s existence, the world was hit by the COVID-19 pandemic so market performance for this fund will be all over the map. As of February 2024, XEQT has over $2.5 billion in assets under management.
XEQT is an all-equity portfolio ETF. This means it is invested in 100% stocks. It currently holds 4 different iShares ETFs which are composed of 9,063 underlying holdings.
Compared to other ETFs, XEQT is more on the actively managed side. It is automatically rebalanced and constantly monitored to maintain target weights for all assets.
Here are some key facts about the XEQT ETF as of February 2024:
|August 7, 2019
|Number of Holdings
|4 with 9,063 Underlying Holdings
|MER (Management Expense Ratio)
|Assets Under Management
|CAD $2.594 billion
|12-Month Trailing Distribution Yield
XEQT Management Fees and MER
When looking at ETFs, one of the most important factors is how much the fees are. XEQT has competitive management fees. In general. the lower the fees are the more of your gains you will keep over the long run. So what exactly are the management fees and MER for an ETF?
The two are not the same although they are often used interchangeably. The MER includes the management fee, which is why you might see the MER as a higher number. The MER essentially means how much the fund manager, in this case, Blackrock, is charging you to own this ETF. Even though XEQT is an actively managed fund, the MER is quite reasonable at just 0.20%.
What does an MER of 0.20% look like? An MER of 0.20% means that for every $10,000 you have invested in VFV, you pay an annual fee of $20.00. Not too shabby at all! This is also an excellent example of why we say low-cost ETFs make a huge difference over the long run.
|XEQT Management Fee
|XEQT MER (Management Expense Ratio)
XEQT Holdings Breakdown
When discussing the holdings of an ETF we typically talk about how much the weighted allocation each stock has in the fund. For an ETF that tracks the S&P 500 index, the holdings are a simple discussion. Other ETFs often track sectors or even other regional stock markets. An ETF like XEQT tracks a lot more than that!
The beauty of XEQT is you get exposure to a lot of markets you wouldn’t otherwise get a chance to invest in. A vast majority of the allocation is to American and Canadian stocks. That shouldn’t be unusual for Canadian investors as easy access to the US stock market can be a blessing. Here is a list of the four holdings that XEQT is composed of:
|Asset Ticker Symbol
|Weighted Allocation in XEQT
|iShares S&P Total US Stock Market ETF
|iShares S&P/TSX Capped Composite Index ETF
|iShares MSCI EAFE IMI Index
|iShares Core MSCI Emerging Markets ETF
As you can see, more than 47% is invested in the US stock market and about 24% is invested in the Canadian stock market. Both XEF.TO and XEC.TO provide nice diversification for Canadian investors. Here is a comparison of the regional exposure in the XEQT ETF:
|Allocation in XEQT ETF
One thing that might stand out is the low allocation to stocks from China. Even though it is the second-largest economy in the world, iShares has chosen to avoid the volatility of Chinese stocks. Other than that it is a nice balanced allocation to many strong economies including Japan, France, and Germany.
XEQT ETF Performance
How has XEQT performed in its limited time as an ETF? Let’s take a look.
On a cumulative basis, XEQT has returned a total of 53.28% to shareholders. This saw an average annual return of 9.99% which is a solid return from an ETF. Don’t forget that this does not take into account any dividend reinvestment. Currently, XEQT is yielding about 2.84% which it pays out quarterly to shareholders.
As can be expected, 2022 was also the worst calendar year since its inception in 2019. XEQT saw a loss of -10.93% in 2022, compared to 11.71% and 19.57% returns in 2020 and 2021 respectively. In 2023, XEQT saw a 17.05% return, providing a nice rebound from 2022.
The Pros and Cons of Holding XEQT
Excellent and instant diversification for your portfolio. Holding XEQT provides exposure to a wide range of the world’s strongest markets. On top of that, Canadians can own XEQT and its international holdings without paying any foreign exchange fees.
On top of its wonderful diversification, XEQT also pays a quarterly dividend. While the 1.38% yield isn’t that high, it is nice for an asset that is not focused on generating income. XEQT is designed for long-term capital appreciation through the growth of its holdings.
The MER of 0.20% is reasonably low for an all-equity ETF. It is not as low as some other ETFs like Vanguard’s VFV.TO which tracks the S&P 500 index. Still, 0.20% is very reasonable and will not impact your future gains that much.
Related Savvy Canadian Finance Article: VFV ETF Review (2024): The Only ETF You Will Ever Need?
Holding an all-stock equity portfolio like XEQT can be risky, especially if the market is showing signs of volatility. As we saw over the past couple of years, even the strongest blue-chip stocks can tumble during a bear market or crash.
There might be a bit too much weight to the US stock market for some investors. With nearly half of XEQT’s allocation in the US stock market, others might seek out a more balanced global ETF.
XEQT vs VEQT
VEQT.TO is the Vanguard All-Equity ETF Portfolio and the closest rival to XEQT. This ETF was established in January 2019, just eight months earlier than XEQT. It has nearly $3.46 billion in assets under management.
XEQT has a slightly lower MER at 0.20% compared to VEQT’s 0.24%. VEQT has a lower distribution yield at 1.88%, but this ETF also only pays its dividend once per year on an annual basis.
In terms of holdings, VEQT has an edge in terms of diversification. Like XEQT, it holds four different ETFs with a 44.32% allocation to the US stock market. It also has a 30% allocation to Canadian stocks. Within its four ETFs, VEQT has more than 13,000 underlying stocks.
XEQT vs XGRO
XGRO.TO is another Blackrock iShares ETF. This fund is called the iShares Core Growth ETF Portfolio and holds a combination of both stocks and bonds. It is designed to provide long-term capital growth and a steady flow of income.
This portfolio ETF has 8 holdings with 20,896 underlying holdings. The MER for XGRO is identical to XEQT at 0.20%. In terms of distributions, XGRO pays out a respectable 3.00% yield on a quarterly basis to shareholders.
Of course, the primary difference is that XGRO has an 18.71% weighted allocation to bonds. Why would you want bonds in your ETF? Bonds and stocks tend to have an inverse relationship. When stocks are down bonds are up and vice versa. Holding them both creates a more neutral portfolio that provides stability in addition to growth.
XEQT ETF Review: Does XEQT Belong in Your Portfolio?
XEQT is an all-stock portfolio ETF from Blackrock iShares. While it does not come without its risks, there are plenty of things to like about XEQT. First, it provides instant diversification across a long list of different markets. It allows Canadian investors to gain exposure to stocks they would not otherwise be able to buy.
With a competitive MER and even a quarterly dividend distribution, XEQT is one of the better all-equity portfolio ETFs on the TSX.
Remember, this is never meant to be financial advice. Do your own research and make sure that investing in XEQT matches your own risk tolerance, investment horizon, and investing goals. Use this guide as a starting point but never as a reason to blindly buy the XEQT ETF!