The iShares S&P/TSX 60 Index ETF (TSX:XIU), as the name suggests, is an exchange-traded fund (ETF) that tracks the performance of the S&P/TSX 60 index. It is an ETF that operates under the popular iShares brand and is managed by BlackRock.
The XIU is listed on the Toronto Stock Exchange (TSX) and aims to provide returns matching the performance of large-cap Canadian equities. The fund was launched way back in 1999, and has since delivered gains of upwards of 500%. The ETF has a quarterly distribution frequency and currently has 60 holdings.
Some of the top holdings of the ETF include Shopify, Royal Bank of Canada, Canadian National Railway, and more. The fund gives the highest weightage to equity in the financial sector (35.91%), followed by energy (13.87%) and information technology (12.15%).
In this review, we’ll be comparing the performance of the XIU ETF with the performance of the S&P 500 and also discuss key points you need to know to make an informed investment decision.
XIU ETF vs. the S&P 500
The S&P 500 is a stock index that represents the performance of 500 large-cap stocks listed in the US. It is a highly popular index and is used to judge the health of the US and global economy.
Over the past five years, the S&P 500 has seen returns of approximately 124%, after adjusting for dividends. In comparison, the XIU ETF, which largely follows top Canadian equities, has delivered returns of approximately 65%.
Both the S&P 500 and the XIU ETF saw a sharp fall in valuation at the start of the coronavirus pandemic, however, the S&P 500 has managed to recover and grow at a much faster pace than the XIU.
Since the mid-March market crash of 2020, the S&P 500 has recorded gains of 100% whereas the XIU ETF has gained 90%.
The slight difference between the gains of the S&P 500 and the XIU ETF may largely be caused by the relatively slower recovery of the Canadian economy as compared to the US economy. However, overall, the XIU ETF has demonstrated a strong showing despite travails caused by the raging pandemic.
Pros and Cons of Investing in the XIU ETF
The most major advantage of investing in the XIU ETF is that you get to bet on the best of the best of Canadian companies. The fund tracks the performance of 60 of the top Canadian companies, and hence, gives you proper blue-chip exposure with a single investment.
The ETF also has a strong track record of past performance. Even though past performance does not guarantee future returns, the XIU ETF is one of the safer investment options out there as far as equities are concerned. Furthermore, the XIU ETF is a relatively cost-effective fund to invest in with a low expense ratio.
The main drawback of the XIU ETF is that it is not a diversified fund. It only invests in equities and is also geographically restricted to Canada.