What’s the XSP ETF?
The BlackRock iShares Core S&P 500 Index ETF (TSX:XSP) is an exchange-traded fund that seeks to replicate the performance of the S&P 500 and its hedged to the Canadian Dollars Index, protecting investors with exchange rate fluctuations.
The XSP ETF aims to deliver long-term capital gains to investors by hedging currency risk, and it is meant to be a low-cost core holding. It does not invest directly in a basket of equities because it is an all-equity ETF. It invests in the iShares Core S&P 500 ETF, which trades on the New York Stock Exchange. It, however, makes no investments in fixed-income instruments such as bonds or GICs. It monitors the performance of the top 500 corporations in the US equity security market, which are spread across several sectors of the economy.
Some Key Facts:
- Inception Date: May 24, 2001
- Net Assets: CAD 7,261,486,747 (as of June 12th)
- MER: 0.1%
- Number of holding: 1
- Distribution Yield: 1.17%
- 12 months Trailing Yield: 1.16%
- Dividend Schedule: Semi-annual
- Risk: Medium-rated
- Exchange: Toronto Stock exchange
Pros of XSP:
- Provides a diversified portfolio that is spread across the top 500 publicly listed corporations in the United States.
- Automatically rebalances to meet your investment objectives
- Provides low-cost exposure to American businesses
Cons of XSP ETF:
- If the stock market in the United States turns volatile, you may experience a steep decline in your portfolio value.
- Has no fixed-income assets in its portfolio.
- Lack of geographic diversification
The XSP ETF is an all-equity fund that diversifies its assets across numerous U.S. economic sectors to give low-cost exposure to the country’s largest publicly listed corporations.
The top iShares XSP holdings are in the technology sector (including Apple, Microsoft, and Amazon). In fact, the IT and communication industries account for five of its top ten holdings (26.50% of asset allocation), followed by health care (13.04%), and customer discretionary (12%).
With a Management Expense Ratio (MER) of just 0.10%, the iShares XSP ETF is an extremely low-cost vehicle that you should consider adding to your portfolio. This makes it far less expensive than other BlackRock iShares ETFs.
Performance and Returns:
Given the success of the top 500 U.S. equities since the fund’s inception, it’s no surprise that the ETF’s recent performance has been great, with the exception of the market meltdown in 2008 and the sharp retreat in February and March 2020. The performance and returns of a hypothetical $10,000 since the fund’s debut in 2001 illustrate that the ETF’s performance and returns follow the performance of the US equities securities market.
Should you add XSP in your portfolio?
iShares XSP outperforms most other all-equity ETFs by providing investors with wide and varied exposure to the top 500 publicly traded firms in the United States. Although it is vulnerable to the impact of turbulent market circumstances, its holdings have large economic moats, allowing for long-term growth. This ETF has the capability to provide you a substantial return in the long-term.