Holding an all-equity portfolio that you pick yourself and ensuring its proper diversification is not an easy task for even the most experienced investors. It requires more than a basic understanding of financial markets and a lot of time.
Instead of worrying about your stock picks losing momentum, you can choose to invest in a portfolio made of several exchange-traded funds (ETFs) that can do all the rebalancing for you.
The iShares Core MSCI All Country World ex Canada Index ETF Portfolio (XAW) is an all-in-one ETF that invests 100% in globally diversified equity securities except for Canadian stocks. In this iShares XAW review, I will discuss everything you need to know about this ETF portfolio to help you make a more well-informed investment decision.
All-Equity Exchange-Traded Fund
BlackRock iShares XAW is a 100% equity all-in-one ETF portfolio.
Pros of iShares XAW ETF Review
- Is easy to use and purchase
- Provides worldwide diversification in one neat package
- Has much lower fees than mutual funds
- Is highly liquid
- Allows you to set it and forget it
Cons of iShares XAW ETF Review
- Has zero exposure to fixed-income securities
- You can expect volatility with 100% stock holdings.
- You may have to hold your entire holding if your risk tolerance changes.
iShares XAW is an ETF portfolio that provides investors with long-term capital growth through investing in one or several ETFs managed by BlackRock Canada.
iShares XAW ETF aims to have 100% exposure to equity securities to provide its investors with long-term capital growth by replicating the MSCI ACWI ex Canada IMI Index’s performance, net of expenses. However, you can expect it to have a small amount of cash or cash equivalents from time to time.
The ETF portfolio provides investors with geographically diversified exposure to equity ETFs managed by BlackRock Canada.
How Do All-in-One Portfolios Work?
All-in-one ETFs are essentially a portfolio of several ETFs designed to make diversified and passive investing easier.
Before all-in-one ETFs came around, it was much more challenging to make an ETF portfolio. You would have to purchase several ETFs yourself and rebalance them to align with your investment goals and risk tolerance based on each ETF’s performance.
However, the advent of all-in-one ETF portfolios like iShares XAW has allowed investors to gain exposure to highly diversified assets that align with their investment goals.
Several ETF portfolios align with different investment goals. You can find out more details about all-in-one ETFs in my list of the best all-in-one ETFs in Canada.
iShares XAW is a medium-risk ETF portfolio that you can consider adding to your investment portfolio.
It invests in a basket of ETFs managed by BlackRock Canada that, in turn, invests entirely in equity securities diversified worldwide.
By investing primarily in six ETFs, iShares XAW ETF provides investors with low-cost exposure to thousands of individual international stocks. XAW does not include any Canadian stocks.
The ETF provides you with globally diversified exposure to stocks. As of February 18, 2021, 57.98% of its entire focus is on U.S. equity securities, while 7.30% is exposed to Japan-based equity securities. Approximately 5.28% of its funds are allocated to China-based stocks, while the rest focuses on stocks in developed and emerging markets.
The ETF portfolio has had a prolific performance based on the swings in the respective stock markets, thereby providing diversified exposure across several sectors of the economy. It has $1.537 billion in total assets under management as of February 19, 2021.
In this section of my iShares XAW ETF review, I would typically tell you about the breakdown of its total funds between fixed-income and equity securities. However, iShares XAW ETF primarily invests in equities and has some exposure to cash or cash equivalents.
It provides 99.62% exposure to equities and 0.38% exposure to cash or derivatives as of February 19, 2021.
I will show you its exposure breakdowns to equity securities based on geography as of February 18, 2021.
iShares XAW ETF is diversified across several countries besides Canada. Although it primarily focuses on the U.S. equity security market, the remaining exposure is divided among Japan, China, the U.K., France, Switzerland, Germany, Australia, Taiwan, and South Korea.
iShares XAW ETF provides investors with highly diversified exposure to equity securities worldwide. However, it does have significant exposure to some stocks.
Its top ten holdings are from the U.S. and China. These top ten holdings comprise 14.763% of its entire holdings of equity securities as of February 19, 2021.
Shown above is a breakdown of its underlying holdings for the top ten securities. iShares XAW ETF’s most significant exposure to a single stock is Apple, Inc., with a 3.45% allocation. Microsoft Corp. comes in second at 2.87%, while Amazon.com, Inc. comes in third, with a 2.24% allocation of its funds.
It largest China-based equity security is Taiwan Semiconductor Manufacturing Co., Ltd., at 0.79% of its entire portfolio.
iShares XAW ETF is diversified across various sectors of the economy. However, it focuses more on the Information Technology sector than others. With the top four of its top ten holdings belonging to the IT sector, the ETF allocates 20.76% of its funds to IT stocks.
Here is a breakdown of iShares XAW ETF sector weightings as of February 19, 2021:
iShares XAW ETF invests heavily in the IT sector, making up a fifth of its holdings. Its second most significant exposure is towards consumer discretionary at 13.65%, while the financial sector comes in third at 12.87%.
iShares XAW is among the low-cost ETF portfolios that you can consider investing in, given the diverse exposure it provides. Its total assets under management stand at $1.537 billion as of February 19, 2021.
iShares XAW ETF boasts a Management Expense Ratio (MER) of 0.22%. While the MER is higher than what you would get if you purchased individual ETFs, the higher MER comes with the following benefits:
- You don’t need to spend time rebalancing the ETFs in the portfolio manually because it automatically realigns to match your goals.
- The MER is much lower than mutual funds and robo-advisors that offer similar exposure and features.
iShares XAW ETF was launched on February 10, 2015. It has just over six years of past performances to draw from in evaluating how many returns it has provided investors over the years.
Nevertheless, iShares XAW ETF has had a fantastic performance in the short time it has been around.
Its average annual returns as of January 31, 2021, are 12.49% year-over-year and 9.61% since its inception.
Here is a chart showing the growth of a hypothetical $10,000 since its inception:
XAW’s chart shows a dip in its performance during the February-March 2020 sell-off. However, it has since recovered and even returned to better valuations than 12 months ago. Its growth of a hypothetical $10,000 shows that a high-growth ETF portfolio providing its investors with phenomenal returns.
As of December 24, 2020, its dividend yield is as follows:
- 12-month trailing yield: 1.41%
- Distribution yield: 1.40%
- Dividend schedule: Semi-annual
iShares XEQT is another all-in-one ETF portfolio offered by BlackRock iShares. It consists of several BlackRock ETFs that focus on equities. The difference is that iShares XEQT also invests in Canadian stocks.
iShares XEQT ETF can be a viable alternative if you want exposure to Canadian stocks as well. You can read my full iShares XEQT review here to find out more.
VGRO is Vanguard’s Growth ETF portfolio. It consists of several ETFs offered by Vanguard.
There are two primary differences between iShares XAW ETF and VGRO. The first is that VGRO offers a more conservative option, as it has an 80/20 split between equity and fixed-income securities. The second difference is that it also provides you with exposure to Canadian securities.
You can read my full Vanguard VGRO review here to find out more.
Investing in iShares XAW ETF can be an ideal option if you do not mind getting 100% exposure to equity securities. Its most significant advantage is its ability to provide you with returns based on the growth of various global equity markets.
While geographical and sector-based diversification can reduce the overall risk, your returns depend entirely on the stocks’ performance. The all-equity portfolio entails above-average investment risks if it makes up your entire investment portfolio, therefore making it a medium-risk investment.
Since it rebalances automatically, you can save a lot of time and trading fees that you would have spent by rebalancing a portfolio of individual stocks manually. Take note, though, that you stand the risk of losing capital during volatile market environments since iShares XAW ETF offers no exposure to bonds or other fixed-income assets to offset the volatility.
The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:
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Passive investors without significant knowledge of stock market investing and financial markets might be interested in stocks but do not know where to begin.
Well, ETFs can provide you with a basket of stocks to invest in based on your investment goals. An all-in-one ETF portfolio like iShares XAW ETF gives you even more diversification by investing in a basket of ETFs that focus on equity securities.
If you are okay with the risks that all-equity investing entails, you can consider investing in iShares XAW ETF since the all-in-one ETF portfolio gets a Wealth Awesome thumbs up.