BLK - BlackRock

XIC ETF Review: Good But You Can Do Better

Affiliate Disclosure

iShares Core S&P/TSX Capped Composite Index (XIC) ETF is a low-cost ETF. This ETF provides exposure to a broadly diversified portfolio of Canadian stocks. It replicates the performance of the S&P/TSX Capped Composite Index, net of expenses.

The ETF roughly represents 95% of the Canadian equity market.

Pros of iShares XIC ETF

  • It is a low-cost ETF.
  • It seeks to provide long-term capital growth.
  • XIC provides exposure to diversified Canadian equities including small, medium, and large businesses .across all the manufacturing sectors.
  • It is designed to be a long-term core holding consisting of the most liquid and traded Canadian stocks.
  • Thorough and balanced diversification offers higher stability.

Cons of iShares XIC ETF

  • It is an all-equity fund and does not provide exposure to other asset classes.

iShares XGRO ETF Facts

  • Inception Date: February 16, 2001
  • Benchmark: S&P/TSX Capped Composite Index
  • Net Assets: $7,991M
  • MER: 0.06%
  • Distribution Yield: 2.63%
  • Dividend Schedule: Quarterly

iShares XIC ETF MER – Management Expense Ratio 

Its management fee is very low at 0.05% and MER is also low at 0.06%. Its contemporaries HXCN ETF and ZCN ETF have MER of 0.05% and 0.06% respectively. XIU has a MER of 0.18%.

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 XIC ETF Performance

Since the company has more than 250 Canadian companies as its core holdings, it has done a good job replicating the TSX index in the last five years.

The annual rate of return for iShares XIC ETF since inception is 6.82% which is lower than XIU’s 7%+ returns. However, the S&P500 still beat it. Why leave the additional retun on the table when you can get it.

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

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
11 2019 6,000 63,500 85,128 114,986 $129,467 $82,596
12 2020 6,000 69,500 95,684 133,030 $153,993 $95,906
13 2021 6,000 75,500 106,769 152,933 $181,601 $113,194
14 2022 6,000 81,500 118,407 174,827 $183,031 $144,633
15 2023 6,500 88,000 131,152 199,459 $217,738 YTD $167,963 YTD
16 2024 7,000 95,000 145,061 227,105
17 2025 7,000 102,000 159,664 257,516
18 2026 7,000 109,000 174,997 290,967
19 2027 7,000 116,000 191,097 327,764
20 2028 7,500 123,500 208,526 368,791
21 2029 7,500 131,000 226,828 413,920
22 2030 7,500 138,500 246,044 463,562
23 2031 7,500 146,000 266,221 518,168
24 2032 7,500 153,500 287,407 578,235
25 2033 7,500 161,000 309,653 644,308
26 2034 7,500 168,500 333,011 716,989
27 2035 7,500 176,000 357,536 796,938
28 2036 7,500 183,500 383,288 884,881
29 2037 7,500 191,000 410,327 981,620
30 2038 7,500 198,500 438,719 1,088,032

iShares XIC ETF Holdings

The ratio of weight can fluctuate on any month at the discretion of the fund manager in accordance with the fund target. It holds approximately 250 stocks trading on the TSX.

XIC ETF is a good way of investing in the top companies listed on the TSX. The Royal Bank of Canada is its most significant holding with more than 6% weightage, followed by Shopify with a ~6% allocation. Toronto Dominion is its third-largest holding, accounting for more than 5% of iShares XIC’s fund allocation.

XIC’s top 10 holdings are identical to XIU ETF and it holds four of the Big Five banks, two energy stocks, two railway stocks, and Shopify. These holdings make up about 38% of the ETF. Compare this to XIU’s 48%.

wdt_ID Sector Ratio
1 Financials 31.26
2 Utilities 4.53
3 Communication Services 4.86
4 Consumer Cyclical 3.54
5 Energy 13.05
6 Basic Materials 11.60
7
8 Industrials 11.30
9 Consumer Defensive 3.86
10 Real Estate 3.21
11 Cash 0.25
12 Technology 11.15
13 Healthcare 1.37

Why hold iShares XIC ETF

XIC is an ideal ETF for investors looking for growth solutions, are planning to hold the investment for the medium to long term, and are comfortable with a medium level of risk.

It is a good way to replicate the performance of the largest (by market capitalization) and most liquid securities listed on the TSX. Not only does this ETF provide good dividends but also offers good and more balanced diversification and stability in case of market volatility. It also reduces concentration risk.

Your choice is basically between XIC, XIU and VFV. The XIU ETF has a small edge over XIC but VFV shines. I vote to stick with an S&P500 ETF such as VFV.

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.