XAW Review: BlackRock’s Best Growth ETF

XAW is from the BlackRock fund house and is considered one of the finest growth ETFs in Canada. But, what makes it great? In this article, I will try to uncover what XAW is all about and why you should be investing in it. Let’s get started. 

With XAW, you are looking at Global portfolio diversification and low cost and simple way to own the US, International, and emerging market stocks. XAW currently trades at $27.57 CAD per share. It has a management fee of 0.20% and MER of 0.22%. (Management Expense Ratio). 

Every Canadian ETF you buy will have an associated Management and MER Fee. The lesser the fees, the more your savings at the end of the year. It’s one of the most important parameters for any ETF you pick, coz the fees reduce the annual return you make from the ETF. 

Remember, ETFs are a pool of stocks that give good returns over the long term. The dividends are paid out on a quarterly or semi-annual basis depending on the symbol and the fund house. 

BlackRock Canada

BlackRock is an investment firm for people from all spheres of life. They are committed to the sustainability of the investments made by you as customers and they accomplish this through meticulous analysis of the stock market.

Blackrock Canada, in its quest to provide both value and growth for its investors, has invested in 100s of ETFs today. 

One of the most significant of these ETFs is the iShares Core MSCI All Country World ex Canada Index ETF or XAW. This ETF started on the 10th of February, 2015 has semi-annual distributions and assets that are currently valued at $1.3 Billion Canadian dollars as market cap.

XAW Key Fund Facts 

  • Net Assets – CAD 1,285,674,991

  • Inception Date – Feb 10, 2015

  • Exchange – Toronto Stock Exchange (TSX)

  • Asset Class – Equity

  • Benchmark Index – MSCI ACWI ex Canada IMI

  • Index Provider – MSCI Inc.

  • Fiscal Year-End – Dec 31, 2020

  • Rebalance Frequency – Quarterly

  • Units Outstanding – 46,700,000

  • Number of Holdings – 6

  • Number of Underlying Holdings – 6

  • CUSIP – 46435D109

  • Price – 27.57

  • Options Available – No

What Does XAW Invest In?

XAW portfolio replicates the performance of the MSCI ACWI ex Canada IMI index.

Below is the list of the Top 10 Holdings XAW Invests In: 

XAW

Now you might ask, what’s special here? 

Let me explain, look at the list of the top 10 Holdings there, one thing you can immediately notice is that XAW invests in a number of BlackRock ETFs to generate the returns it has. 

The ETFs XAW invests in are – IVV, XEF, IEMG, IJH, IJR, ITOT and a small percentage of cash for further investments when the market is right. 

Just look at the diversification here – IVV stands for the US S&P 500 stocks, XEF is the MSCI EAFE IMI Index fund, and then you have the emerging markets, Total US Markets, Small and Mid Cap S&P Index. 

The majority of your money is invested in IVV (50%) and next is XEF and IEMG (Emerging Markets). 

My point is pretty clear here, XAW is an extremely well-diversified ETF that invests your money in several other ETFs under BlackRock and this is what makes the returns so good.

By investing $1 into this stock, you are investing that one dollar into S&P, developed and emerging markets. What more or better do you need, right? 

Performance Of XAW

Let’s look at the performance of XAW here. How well the ETF has performed over the years. The industry standard is 3m,6m, 1 yr, 3 yr, 5 yr and max. Let’s do this. 

Calendar Returns since 2015 (XAW Inception Year):

XAW Returns

XAW Growth for $10000 Invested since 2015: 

XAW Growth of $10000

As with every other ETF out there in TSX, the iShares Core MSCI All Country World ex Canada Index ETF (XAW) has had its ups and downs. Stock markets are volatile and so are equities. 

However, XAW has had a steady performance over a 3 to 5 year performance period.

Its year-by-year returns show that in its first year, it had a 5.39% return on investments and this increased to 15.9% in its second year. Its performance dropped in its third year to -1.7%.

As of the financial year-end 2019, the ETF recorded an average return of 19.37%. A $10.000 investment at inception would be worth $16,000 today.

Again, do remember the art of dollar-cost averaging while investing in ETFs. This way you’ll end up buying more shares when the market is down and less during peak times. By doing so the returns of your investments usually will be higher. 

XAW Best And Worst Performance Months 

XAW has had its best monthly performance in April 2017, where there was a 10.81% return on the investments.

That means a $1000 investment would have turned into $1108 in one month.

The worst monthly performance recorded was in December 2018. This period showed a -8.04% return on investment. A $1000 investment during this period would have fallen to $920.

On average, the ETF did quite well. 

How Risky Is It To Invest In XAW?

First of all, there is no equity investment which can promise you only growth, If there’s anything as such then it’s for sure a scam.

As with every other equity investment, you can definitely lose all your money with XAW. So always invest with a proper financial mindset and for the long term to minimize losses.

Even though the chances of you having to lose the capital invested is less with the diversity that XAW offers you, you still have to be safe. It is best to determine the volatility of any fund as that would determine the amount of risk attached to it. The more volatile a fund is, the higher the returns and the higher the risk.

XAW has a medium risk rating from the BlackRock fund house. This means that the chances of you losing money are just as high as the chances of you making money. 

You may lose all the money you invest or you could make a lot of money in return. It all depends on the state of the market at that point in time.

XAW Pricing And Trading

XAW has two prices, just like all other ETFs in the market: the market price and the Net Asset Value (NAV) price.

The Net Asset Value (NAV) price is calculated at the end of each trading day. It represents the value of the ETF’s investments at the end of the trading day. The NAV price is calculated to present financial information on the ETF.

The NAV price for XAW varies between $22.80 and $26.60 at the end of trading by 31st January 2019.

The Market price is the rate at which ETFs are bought and sold on the market. It has a tendency to vary all through the trading period.

It can be affected by factors such as the demand, the supply and the value variations of an ETF’s investments. The market price for this ETF varied between $22.87 and $26.67 at the end of trading by 31st January 2019. The current price is $22.69.

Quotes can either be bids or asks and they are readily available throughout the trading day. Bids are the highest price that a buyer is willing to pay for the ETF units that are being sold. Asks are the lowest price you are willing to sell your ETF units for.  

XAW Exposure Break Down 

Below is the worldwide exposure breakdown of where XAW invests every dollar in: 

XAW Exposure Breakdown

XAW Sector Wise Exposure Breakdown:

Exposure Breakdown XAW Bid-Ask Spread 

The variance between the two prices – Market Price and NAV is known as the bid-ask spread.

The smaller the bid-ask spread is, the more liquid ETF is. This means that you are more likely to get your asking price with a small bid-ask spread than with a large spread.

If you are looking to trade ETF units, you can go about it in two ways. You can either use market orders or limit orders.

A market order will let you buy and sell units at the current market prices, while a limit order will let you set the specific price you are willing to pay or accept for ETF units.

Also, note that ETFs are known to be more volatile at the close and open of each trading day. It is advisable to not trade during these periods. If you’re interested in trading, consider using limit orders rather than market orders.

Who Is XAW For?

If you are the type of investor that is looking for long-term capital growth, planning to hold investments for over a long period, seeking to invest in an ETF portfolio that invests in a broadly diversified portfolio of U.S., international, and emerging market stocks.

You’ll need to be comfortable with the medium risk attached, iShares Core MSCI All Country World ex Canada Index ETF (XAW) is for you.

What About Taxation?

You will be taxed on the returns made from this ETF. It is considered to be a source of income and as such carries income tax.

How much you are taxed depends on the tax laws of where you live. However, tax is not deducted if the ETF is held in a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA).

Bear in mind that, if you do not have your ETF in a registered account, you will be taxed on distributions from the ETF. This is regardless of whether it is collected in cash or reinvested.

Other Important Things To Know About XAW

  • You may have to pay brokerage commissions on each ETF trade. Each brokerage firm will charge commissions according to its own trading rules. Firms may also offer commission-free ETFs such as Wealthsimple Trade

  • You will incur ETF expenses. These expenses are not paid directly, rather they are charged on your returns. This means your returns will drop by how much expenses you incur. These expenses are operating expenses, trading costs, and management fees

  • The expenses of this ETF is valued at 0.23% of its value. That means $2.30 is paid for every $1000 investment made

  • XAW is exempted from paying trailing com. These are charges for the services and advice that your brokerage firm provides you

XAW vs. VGRO

In this section let’s quickly compare the market returns of XAW and VGRO. 

Both XAW and VGRO are extremely popular in the ETF world. VGRO is from the Vanguard Fund house. 

XAW vs. VGRO

XAW vs. VGRO

Note that I’ve selected the maximum time frame to compare the market returns, the reason being simple, the longer the time frames you can witness the true market returns of any investment – be it stocks or ETFs. 

In the second screenshot, you can see the dividend percentages of both XAW and VGRO at 1.87% and 1.76%. 

XAW vs. VFV vs. ZSP 

VFV and ZSP and S&P 500 US ETFs.

While VFV is from the Vanguard Fund house, ZSP is from BMO. Both these ETFs have some of the best market returns. So let’s quickly compare them with XAW and find out which one’s actually better over the longer frame of time. 

XAW vs. ZSP

XAW vs VFV

As you can see, VFV is a clear winner here. Nothing more to say. S&P 500 stock returns are as such and often considered the benchmark for returns when compared. 

VFV and ZSP are very similar in terms of market returns, both track the US S&P 500 stocks. 

XAW vs. VCN

While XAW is from BlackRock, VCN is from Vanguard. 

Both these ETFs are excellent picks for the long term.  However, in this section let us quickly compare the market returns of XAW vs. VCN and see which one actually shines the best. 

I’ve considered the time frame here to be 5 years, coz the longer the time frame, the better you can identify the quality of the investment. XAW is the clear winner here over VCN, with overall market returns of 47.48% as compared to 24% by VCN.

XAW vs. VCN

XAW vs. VCN Dividend payout

XAW vs. VCN

As per the data and reports, VCN pays you more dividends when compared to XAW. VCN pays 2.42% while XAW pays you 1.81% of dividends. 

Conclusion 

There you go, that was my in-depth review of XAW. Hope you enjoyed the post and found something interesting. 

I’ve also gone ahead and compared some of the best Canadian ETFs in the market with XAW. 

Let me know your thoughts and comments below. Also, do share this post if you find it helpful. Thanks for reading! 

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XAW

4.95

Value For Money

5.0/5

Features & Benefits

5.0/5

Rewards

5.0/5

Pros

  • Very well diversified
  • Low Management and MER Fee
  • BlackRock fund house is backing it up

Cons

  • Returns can be better
  • Can't be compared to S&P 500 ETFs such as VFV or ZSP

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