XGRO ETF is a multi-asset ETF that invests in one or more ETFs managed by BlackRock Canada or its affiliates, providing exposure to stocks and fixed income securities. The ETF offers investors long-term capital growth as well as income. XGRO ETF offers exposure to an ETF portfolio that is diversified by asset class and region.
The iShares XGRO ETF is managed according to a long-term strategic asset allocation of ~ 80% equity and ~ 20% bond exposure. The ETF was changed with effect from December 11, 2018 with regard to its basic investment objective, management fee and fee structure.
The ETF is part of a group of 5 ETFS that can be used to manage a portfolio based on your desired bond and equity exposure.
Benefits of the iShares XGRO ETF
- Inexpensive ETF with a MER of 0.20%.
- It is continuously monitored and rebalanced every quarter.
- XGRO offers exposure to ETFs that are diversified across regions and asset classes.
Disadvantages of iShares XGRO ETF
- Offers exposure to equity ETFs managed only by BlackRock Canada.
- XGRO is massively focused on Canada.
- XGRO’s MER is higher than any other component individually. You pay for someone to rebalance – it’s like a concierge service fee.
iShares XGRO ETF facts
- Starting time: June 21, 2007
- Benchmark: None – 80% equity ETF from iShares Core Growth ETF portfolios
- Net worth: $ 957M
- MER: 0.20%
- Distribution income: 1.51%
- Dividend plan: Quarterly
iShares XGRO ETF MER – management expense ratio
XGRO’s management fee is 0.18% and MER is 0.20%. Contemporaries Vanguard’s VGRO and Blackrock’s ZGRO have MERs of 0.25% and 0.20%, respectively.
The MER is what Blackrock needs to run the fund. It’s much cheaper than mutual funds and, in some cases, cheaper than investing on your own.
Mutual funds can charge over 2% and rob you of your returns. It’s time to ditch your mutual funds and switch to ETFs as soon as possible. Many brokers like Questrade offer free ETFs.
iShares XGRO ETF performance
The annual return of the iShares XGRO ETF has been 4.30% since inception. It has outperformed the broader S&P500 index over the past five years.
It’s a pretty sluggish performance, but then recently it beats the TSX.
When it comes to investing 100% in equity, there are many options. A simple SP500 index can do the job. You know the saying, keep it stupid simple (KISS).
Take your TFSA account as an example. The rules are the same for everyone and I mean everyone. Ultimately, growth is a factor in your investment performance, provided you meet your TFSA contribution limit each year. The annual performance of an ETF is important as you can see from the 20+ year growth below.
|1||2009||5,000||5,000||5,250||5,500||Not pursued||Not started|
|2||2010||5,000||10,000||10,762||11,550||Not pursued||Not started|
|3||2011||5,000||15,000||16,550||18.205||Not pursued||Not started|
|4th||2012||5,000||20,000||22,628||25,525||Not pursued||Not started|
|5||2013||5,500||25,500||29,534||34,128||$ 41,742||Not started|
|6th||2014||5,500||31,000||36,786||43,590||$ 52,820||Not started|
|7th||2015||10,000||41,000||49.125||58.949||$ 56,307||Not started|
|8th||2016||5,500||46,500||57,356||70,984||$ 70,200||Not started|
|9||2017||5,500||52,000||65,999||84.034||$ 78,900||$ 13,308|
|10||2018||5,500||57,500||75,074||98,487||$ 96,937||$ 58,818|
iShares XGRO ETF holdings
Unlike an S & P500 ETF, where your exposure comes from US companies, XGRO is diversified across countries and continents.
The iShares XEQT Core Equity ETF Portoflio invests in 4 different ETFs in order to achieve the geographical diversification described.
The equity section is below. Same ETFs as XEQT, but with a different ratio.
- ITOT – (36.88%) ISHAFT CORE S&P TOTAL US SHARES
- XIC – (20.67%) ISHARES S & P / TSX CAPPED COMPOSITE
- XEF – (19.91%) ISHARES MSCI EAFE IMI INDEX
- IEMG – (3.94%) ISHAFT KERN-MSCI-EMERGING MARKETS
The following ETFs are now used for the fixed-income part (20%).
- XBB – (11.60%) ISHS CORE CAD UNIV BND IDX ETF
- IEMG – (3.94%) ISHAFT KERN-MSCI-EMERGING MARKETS
- USIG – (1.92%) ISHARE’S BROAD USD INVESTMENT
- GOVT – (1.86%) ISHAFT US-TREASURY BOND ETF
XGRO ETF invests ~ 80% in stocks and ~ 20% in fixed income as opposed to XBAL’s 60:40 ratio. This fund is more growth-oriented.
The ETF may also invest a small amount of cash or cash equivalents from time to time. It also has investments in US Treasuries.
Why hold iShares XGRO ETF?
XGRO offers a growth solution with a perfect mix of 80% stocks and 20% bonds. It’s a great option for investors just starting out with investing.
It’s simple, well diversified, and an affordable ETF. XGRO also offers balanced geographical diversification. The ETF offers a good opportunity for investors looking for long-term growth and income solutions, who want to hold the investment for the medium to long term and who carry a low to medium risk.
It’s cheaper, rebalanced quarterly, and asset and geographic diversification are other benefits. It’s a hands-off solution.
I am voting to stick with an S&P500 ETF like VFV.
If you want the dividends, it’s not clear you’re getting the same growth, but the best banks and the best utility stocks will bring you more income.