XAW ETF Review: Not beating the S&P 500

XAW ETF provides exposure to a broadly diversified portfolio of US, international, and emerging market stocks. It replicates the performance of the MSCI ACWI ex Canada IMI Index, net of expenses.

The ETF captures large, mid, and small-cap companies across 22 of 23 developed markets countries (excluding Canada) and 27 emerging market countries by investing primarily in six ETFs.

XAW ETF invests in securities of one or more ETFs managed by BlackRock or an affiliate.

Pros of iShares XAW ETF

  • XAW provides global portfolio diversification.
  • It seeks to provide long-term capital growth.
  • It provides global diversification – US (~60%), international (~29%), and emerging market (~12%).
  • XAW has a lower MER fee and higher distribution yield when compared to its peer, VXC ETF.
  • The ETF rebalances itself without you worrying about.
  • More beneficial in terms of fees, taxes, and currency risks.

Cons of iShares XAW ETF

  • Only that the S&P 500 index still beat it

iShares XAW ETF Facts

  • Inception Date: February 10, 2015
  • Benchmark: MSCI ACWI ex Canada IMI
  • Net Assets: $1,621M
  • MER: 0.22%
  • 12 Month Trailing Yield: 1.40%
  • Distribution Yield: 1.39%
  • Dividend Schedule: Semi-annual

iShares XAW MER – Management Expense Ratio 

XAW’s management fee stands at 0.20% and MER is 0.22%. Its contemporary Vanguard’s VXC ETF has a MER of 0.27%.

The MER is what Blackrock takes to manage the fund for you. It’s much cheaper than mutual funds and in some cases cheaper than investing on your own.

Mutual funds can charge over 2% and it robs you of your returns. It’s time to ditch your mutual funds and switch to ETF ASAP. Many brokers such as Questrade offer free ETFs.

iShares XAW Performance

The annual rate of return for iShares XAW ETF since inception is 10.26%. It has underperformed the broader S&P500 index.

XAW ETF vs TSX vs SP500
Dividend Adjusted Chart by Stock Rover - Try it out.

The annual rate of return for iShares XAW ETF since inception is 10.26%. When you compare with my annual ROR of 14.40%, there is a big difference. Just look at the S&P 500 index to get a different perspective.

Take your TFSA account as an example. The rules are the same for everyone and I mean everyone. The growth is ultimately a factor of your investment performance provided you make your TFSA contribution limit every year. The annual performance of an ETF matters as you can see below the growth over 20+ years.

wdt_ID Year Yearly Limit Cumulative 5% Growth 10% Growth Dividend Earner Spousal
1 2009 5,000 5,000 5,250 5,500 Not Tracked Not Started
2 2010 5,000 10,000 10,762 11,550 Not Tracked Not Started
3 2011 5,000 15,000 16,550 18,205 Not Tracked Not Started
4 2012 5,000 20,000 22,628 25,525 Not Tracked Not Started
5 2013 5,500 25,500 29,534 34,128 $41,742 Not Started
6 2014 5,500 31,000 36,786 43,590 $52,820 Not Started
7 2015 10,000 41,000 49,125 58,949 $56,307 Not Started
8 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 XAW ETF Holdings

As it happens, XAW is an ETF build from other ETFs. It is made up of 6 ETFs

  • IVV ETF – iShares Core S&P
  • XEF ETF – iShares MSCI EAFE IMI Index
  • IEMG ETF – iShares Core MSCI Emerging Markets
  • IJH ETF – iShares Core S&P Mid-Cap
  • IJR ETF – iShares Core S&P Small-Cap
  • ITOT ETF – iShares Core S&P Total U.S. Stock

iShares XAW ETF Sector Allocation

iShares XAW is more balanced than others but it also cover the world with 60% of the coverage coming from the US.

wdt_ID Sector Ratio
1 Financials 14.13
2 Utilities 2.81
3 Communication Services 8.61
4 Consumer Cyclical 6.83
5 Energy 3.11
6 Basic Materials 5.50
7
8 Industrials 11.41
9 Consumer Defensive 3.57
10 Real Estate 3.42
XAW ETF by Geography

Why hold iShares XAW ETF

XAW beats all other Canadian Dividend ETF which makes it the best but it’s not about the dividend income but about total returns.

XAW vs TSX vs SP500 2021
Dividend Adjusted Chart by Stock Rover - Try it out.

If you want the dividends, it’s not clear you will get the same growth but the the best banks and the best utility stocks will give you more income.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.