This is an XEQT review that covers the ETF’s key features such as its ETF and stock holdings, returns, fees, how it compares to other all-in-one funds like VEQT and XGRO, and so on.
One of the easiest and quickest ways to build a low-cost diversified portfolio is through all-in-one, one-ticket ETFs like the iShares Core Equity ETF Portfolio (XEQT) from BlackRock.
Also called asset allocation ETFs, these types of ETFs are ideal for all do-it-yourself investors, irrespective of their investing experience. Want to build an all-equity diversified portfolio without the high brokerage costs and regular rebalancing stress and costs? XEQT or one of the available ETFs will let you do just that.
But are they right for you? This post will go into detail about XEQT’s offerings so you can decide if it’ll fit into your investment portfolio.
What is XEQT ETF?
XEQT is a 100% equity allocation ETF from BlackRock Canada and one of its 5 multi asset or all-in-one diversified portfolios.
iShares Core Equity ETF Portfolio (XEQT) primary objective is to provide “long-term capital growth” to its investors by investing in equity securities across the world.
XEQT is listed on the Toronto Stock Exchange (TSX) and commenced trading in August 2019 as a Canadian dollar denominated ETF.
With more than 9,400 underlying individual stocks at the time of writing, XEQT is a smart way for investors to quickly build a portfolio that is diversified across all sectors and worldwide with a single purchase.
Here are the key Fund Facts for XEQT, iShares Core Equity ETF Portfolio:
- Dividend: Quarterly
- Account Eligibility: RRSP, RRIF, RESP, TFSA, DPSP, RDSP
- Asset Under Management: $490.1 million
- Management Expense Ratio: 0.20%
- Inception date: August 7, 2019
- Equity Allocation: 100%
The asset allocation ETF invests in a broad range of companies across size, sector and geography. We’ll provide an overview of its holdings across each of these factors in the following sections.
XEQT Stock Holdings
The BlackRock all-equity ETF only holds other ETFs, but it also provides information on the underlying individual companies that makes up its assets.
As of June 3, 2021, XEQT had a total of 9,875 individual securities spread across the world. The top 10 stocks are presented below and contains some of the largest and most popular companies in both Canada and United States.
|Royal Bank of Canada||1.57|
|Bank of Nova Scotia||0.86|
|Canadian National Railway||0.84|
Together, the VEQT’s top 10 holdings account for 13.31% of its total assets.
XEQT ETF Holdings
XEQT does not hold the individual stocks above directly. Rather, it gains exposure to the stocks by holding 4 other ETFs managed by Blackrock. In other words, XEQT is a fund of funds.
The four Blackrock ETFs that makes up XEQT holdings and their weights as at June 3 2021 are:
- iShares Core S&P Total U.S. Stock ETF: 46.53%
- iShares S&P/TSX Capped Composite ETF: 24.92%
- iShares MSCI EAFE IMI Index ETF: 23.36%
- iShares Core MSCI Emerging Markets ETF: 4.97%
It also holds a negligible amount of cash.
XEQT Sector Weighting
The asset allocation ETF is also diversified across sectors. Financials and Information Technology are the 2 largest sectors with 18.4 and 17.1% respectively.
Overall, the top 5 sectors account for two thirds or 67% of its total assets as at June 2021. Of course, the allocations may look different over time depending on how each sector performs.
The sector weightings as at June 2021 for XEQT were:
XEQT Geographical Allocation
XEQT is heavily exposed to the North American economy. Its exposure to Canada and U.S. stocks are about 70%, with the balance spread across other markets around the world including Japan, China and EU.
The top 10 countries represent 92% of XEQT’s assets as of June 2021.
Here’s a summary of XEQT holdings:
- Built using 4 other BlackRock iShares ETFS
- Over 9,000 individual stocks
- Allocation to countries around the world with 70% in North America
- Top 3 sectors (Financials, Technology and Customer Discretionary) account for almost 50% of XEQT’s holding
The management fee for XEQT is currently 0.18%. After including the other operating costs of the ETF, the total cost or management expense ratio (MER) is just 0.20%.
This is a big bargain given that the average mutual fund fee in Canada is about 2%.
With XEQT, you’ll pay just $200 on a $100,000 portfolio compared to about $2,000 for the average mutual fund.
Depending on the brokerage you use, you may also have to pay some trading or brokerage commissions to buy the ETF. But you can buy them commission free at some brokerages. More on this below.
XEQT pays a quarterly dividend. However, the portfolio’s objective is to provide capital growth and not regular income distribution to investors.
As at June 2021, it only had a dividend yield of 1.53%. Therefore, if you seek regular and high dividends, you may be better off investing in a dividend ETF.
Related Post: Best Canadian Bank ETFs
XEQT has been trading for less than 2 years so performance data is limited and we can’t compare its long-term performance to other ETFs.
But we can look at its performance since inception and 1-year returns. Year-to-date, XEQT has returned 7.90% and a 1-year performance of 27.08%.
|Year to date||6 months||1 year||Inception|
|Total Returns (%)||7.90||10.65||27.08||30.97|
$10,000 in XEQT since inception (Aug 2019) would have grown to $13,069 by May 2021 – not a bad performance.
Next, we look at how iShares XEQT compares to other one-ticket funds, including the ones from Vanguard.
The iShares Core Growth ETF Portfolio (XGRO) is another asset allocation ETF from BlackRock and its most popular with over $900 million in asset under management.
XGRO has been around for much longer with a commencement date of June 2007. Both ETFs have the same fees of 0.20% in MER.
The only difference between the 2 ETFs is the asset allocations. While XEQT has a 100% equity allocation, XGRO has 80% exposure to equity and 20% to bonds.
However, they both get their equity exposure through the same 4 underlying ETFs though. XGRO ETF’s bond allocation is provided using 4 other iShares ETFs for a total of 8 underlying ETFs.
The other asset Allocation ETFs from BlackRock Canada are:
- iShares Core Balanced ETF Portfolio(XBAL): Classic 60:40 balanced portfolio
- iShares Core Conservative Balanced ETF Portfolio (XCNS): 40% equity allocation
- iShares Core Income Balanced ETF Portfolio (XINC): 20% equity allocation
Vanguard All-Equity ETF Portfolio (VEQT) is Vanguard Canada’s all-equity ETF portfolio. Like XEQT, it is also 100% invested in equities and was introduced in the same year (January 2019).
VEQT holds 4 other Vanguard ETFs, that collectively invests in over 12,848 underlying stocks across 47 countries. So you’re getting even more diversification than with XEQT.
However, the ETF has a slightly higher management fee and management expense ratio of 0.20% and 0.22% respectively.
So which one is better between XEQT and VEQT? Both all-equity ETFs are well-diversified and you really can’t go wrong with either one. However, VEQT is more diversified and with a year-to-date returns of 8.27% as at May 2021, it has performed slightly better than XEQT
Learn more about VEQT in this VEQT review.
XEQT Vs XUS vs XSP
iShares Core S&P 500 Index ETF (XUS) and iShares Core S&P 500 Index ETF (CAD- Hedged) (XSP) are two other all-equity ETFs from the Blackrock Canada’s family of ETFs.
The only difference between the two is that XSP is hedged against currency risk, while XUS is not.
Both of them trade in CAD on the TSX and invest in U.S. companies by tracking the S&P 500 index.
At an MER of just 0.10%, XUS and XSP have lower cost than XEQT. But they are less diversified funds with 100% of their assets invested in the U.S.
If you’re just looking to hold a US equity fund as part of a broadly diversified portfolio, then both ETFs are great options. Otherwise, you’re better off investing in a more diversified ETF like XEQT.
Another alternative to XEQT is investing through a robo-advisory service.
Robo-advisors help you build a hands-off diversified portfolio with little money. By investing in XEQT, you’re actually doing the same thing but with BlackRock Canada as the portfolio manager.
With both options, you invest your funds in a portfolio of stocks that is regularly rebalanced and its asset allocation brought back to your target.
But there are difference in the total cost you’ll pay for both options.
Questwealth Portfolio, Questrade’s robo-advisor offering, has a low management fee of just 0.25%. After adding the MER for the underlying ETF holdings, you can expect to pay about 0.40%.
On the hand, Wealthsimple, Canada’s most popular robo-advisor has a management fee that starts at 0.50% for asset below $100,000. The underlying ETFs will add another 0.20% to the total cost.
So based on cost alone, XEQT is a better offering than robo-advisors though you’ll need to spend some time placing the trades each time you contribute new funds. And there could also be trading costs depending on your brokerage.
These concerns are not a big deal though since:
- It won’t take you more than a few minutes to place trades each time you add new funds; and
- There are brokerages that lets you buy ETFs for free: Questrade and WealthSimple Trade.
Pros and Cons of XEQT
Pros of XEQT:
- Automatic rebalancing requiring little maintenance on an on-going basis
- Provides instant global diversification with a single buy
- XEQT stock is priced low so it is easier to buy when you are investing small amounts of money
- Cheaper than the comparable ETF from Vanguard
Cons of XEQT:
- With a 25% allocation to Canada, XEQT has a home bias.
- Holding the individual underlying ETFs is cheaper, though more stressful
Also, since it is 100% invested in stocks, it is subject to more volatility compared to the other asset allocation ETFs from iShares. However, this isn’t a con as long as you’re investing according to your risk appetite.
Is XEQT right for you?
So is XEQT a good investment for you? It all comes down to your financial goals and risk tolerance.
XEQT and other ETFs with 100% equity exposures may provide higher returns but they also come with higher volatility and are more susceptible to short-term swings.
Therefore, XEQT may be right for you if you:
- have a long investment horizon
- can tolerate the regular volatility – that is, you have a higher risk appetite
- are looking to build a low-cost diversified portfolio at the fraction of the cost of mutual funds
- don’t want to deal with regular portfolio rebalancing
Also, XEQT may be perfect for parents that are just starting to save and invest for their kid’s post-secondary education using RESP. I wrote about how to build a DIY RESP model portfolio here.
How To Buy XEQT
You can buy iShares XEQT at any of the brokerages and investment platforms in Canada. This will cost you anywhere between $5 – $10 per trade.
But even better, you can buy the ETF at a brokerage that allows commission-free ETF purchase.
Questrade is Canada’s most popular online brokerage. It lets you buy ETFs commission-free but selling ETFs or trading individual stocks costs 1 cent per share ($4.95 minimum and $9.95 maximum).
You can get a $50 trade rebate when you sign-up for Questrade using the promo code in the link. The promo code will be automatically applied when you create an account.
Related: Questrade Offer Code (Up to $300 in bonuses)
Wealthsimple Trade is Canada’s first commission-free trading app. Buying and selling Canadian dollar denominated ETFs and Stocks are completely free.
However, trading USD stocks come with a currency conversion cost of 1.5% added as a spread on the exchange rate. Get $10 when you sign up for a new account here.
Some FAQs: XEQT Review
It depends. If you have a long investment horizon and an above average risk tolerance, an all-equity one-ticket fund like XEQT is a great addition to your portfolio.
XEQT is an all-equity asset allocation ETF, meaning it is 100% invested in stocks. About 70% of that is invested in Canadian and U.S. stocks.
XEQT pays dividends quarterly. It’s dividend yield as at June 3, 2021 is 1.53%.
Conclusion: XEQT Review
This XEQT review is very positive. The ETF provides a simple and cost-effective way to quickly build an all-equity diversified portfolio and would make a great addition to any investment portfolio.
If you’re looking for an almost hands-off portfolio that you won’t have to worry about rebalancing, then XEQT or any of the other asset allocation ETFs are a good place to start.
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