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.
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.