iShares Core Growth or XGRO Is one of the best growth ETFs from the BlackRock fund house.
XGRO’s current NAV (Net Asset Value) stands at $22.10 CAD at the time of writing. It’s year to date (YTD) market return is 4.81%. XGRO has a Risk Indicator of Low to Medium by the BlackRock Fund House.
Don’t think of XGRO/VGRO as 1 fund, because they are a fund-of-funds. I like XGRO over VGRO because XGRO is more heavily invested in US stocks, and has a lower MER. I also do the pre-authorized purchase plans with TD e series funds, but will likely transition out of them as just buy the ETF’s on WealthSimple Trade.
For example, XGRO is made up of 8 other ETFs so whether you buy those ETFs individually or you buy XGRO, you still own the same portfolio. Owning an all-in-one fund isn’t “putting all your eggs in one basket” in case that’s what was concerning you.
In this article let’s take a look at everything XGRO has to offer, in terms of diversity, characteristics, market returns, dividends, exposure to the sectors in the market any and so on.
Now, Let’s begin.
First of all, why XGRO?
When you have a bunch of interesting Canadian ETFs and Mutual why choose the XGRO? What makes it appealing to the end-user like you and me?
Like I said earlier, XGRO is from the BlackRock fund house. In case you don’t know, BlackRock is one of the best fund houses in the wold along with Vanguard and others.
While the BlackRock fund house has 100s of excellent ETFs under its portfolio, XGRO being one of them.
With VGRO or XGRO you can almost flip a coin. I’d personally lean toward XGRO for the lower MER, slightly higher US allocation/less Canadian, and the option to DRIP.
Otherwise, you can’t go wrong with either and they will perform very closely in the long term. FWIW, when you backtest XGRO vs VGRO to 25 years, XGRO performed slightly better at 7.49% vs 7.22% with VGRO.
One should go with TD e series if they highly value automating the process as much as possible since you have the ability to set up a pre-authorized purchase plan (PPP).
The advantage with this is when you automate things you are more likely to be disciplined and stick to your plan. If you think you can be disciplined and consistent with buying ETF shares on a regular basis, then I’d go in that direction.
By Investing in the XGRO you’ll end up with having exposure to a portfolio of ETFs that is broadly diversified by asset class and across regions, in one convenient package
XGRO is continuously monitored by asset managers and automatically rebalanced, as needed, in order to maintain asset class target weights
The management fee is only 0.18% and MER 0.20% (Management Expense Ratio), which are the best in class for any Exchange Traded Fund (ETF)
XGRO ETF Characteristics
First of all, in case you don’t know, XGRO accepts investments through DRIP, PACC and SWP.
The dividend yield is 2.43% or $0.13 and is paid out quarterly.
Quick Look At The XGRO Fund Facts:
CAD 428,671,350 (428 M)
Jun 21, 2007
Toronto Stock Exchange (TSX)
Dec 31, 2019
Top 10 Holdings of XGRO
|Ticker||Name||Sector||Market Value||Weight (%)||Notional Value|
|ITOT||ISHARES CORE S&P TOTAL U.S. STOCK||Corporates||CAD 163,661,023.29||38.18||163,661,023.29|
|XIC||ISHARES S&P/TSX CAPPED COMPOSITE||ETFs||CAD 84,130,309.08||19.63||84,130,309.08|
|XEF||ISHARES MSCI EAFE IMI INDEX||Corporates||CAD 83,364,927.10||19.45||83,364,927.10|
|XBB||ISHS CORE CAD UNIV BND IDX ETF (CAD)||Corporates||CAD 51,061,686.40||11.91||51,061,686.40|
|IEMG||ISHARES CORE MSCI EMERGING MARKETS||Corporates||CAD 16,961,139.68||3.96||16,961,139.68|
|XSH||iShares Core CAD ST Cor Bd Index||Corporates||CAD 12,974,539.69||3.03||12,974,539.69|
|USIG||ISHARES BROAD USD INVESTMENT G||Corporates||CAD 7,929,697.89||1.85||7,929,697.89|
|GOVT||ISHARES US TREASURY BOND ETF||Treasury||CAD 7,725,855.16||1.80||7,725,855.16|
|CAD||CAD CASH||Cash and/or Derivatives||CAD 444,786.02||0.10||444,786.02|
|USD||USD/CAD||Cash and/or Derivatives||CAD 290,144.07||0.07||290,144.07|
As you can notice from the above chart, almost 38% of your money in XGRO goes into ITOT which is an S&P Total US Market Fund.
While the YTD returns of ITOT is 8.45%, the Expense Ratio is excellent at just 0.03%.
Let’s briefly look at the ITOT returns for the maximum time frame:
As you can see, the returns have been excellent! That’s because the overall US markets have done extremely well in recent months.
Next, 19.13% of your XGRO money is invested in XIC.
Now, XIC is another excellent ETF from the BlackRock Fund house. With XIC, you’ll pretty much own the entire Canadian Stock Market.
XIC returns snapshot: (Maximum time frame)
Now, that’s 60% of your money invested through XGRO into ITOT and XIC.
Next up is XEF, with a 19.5% allocation. Now, what is this XEF?
XEF is another ETF from the BlackRock fund house which contains over 1500 stocks from Europe, Asia, and Australia. The YTD returns of the XEF fund is not all that great and is negative at -2.5%.
XEF Chart: (Market Returns)
So that’s where 80% of your XGRO money is invested in.
The rest of the money is invested in XBB, Emerging Markets and Hedge funds for (USD/CAD exchanges).
All I can say here is that the money you invest in XGRO is extremely well diversified with good geographical exposure. Let us continue.
XGRO Exposure Breakdown
Even though the majority of the money invested by XGRO is in equities, almost 18.59% of your money goes into the Fixed Income as well with Cash at 0.20%.
Cash and/or Derivatives
XGRO ETF Performance
Below is the market performance of XGRO:
Please note that I have considered the calendar year returns so that it’ll help you know the market returns in a more transparent and better understanding of the returns you can expect: (average)
XGRO vs. VGRO
Alright then, first of all, while XGRO is from BlackRock, VGRO is from Vanguard.
For the record, VGRO’s inception date is January 24, 2018, and XGRO’s is December 11, 2018.
First of all, the MER of VGRO is 0.25 while the management fee of XGRO is 0.18.
Regarding the US performing better than Canada, this is true for the past few years. But we cannot predict how the US performs in the long term for the next 20 years or more. Also, the difference in allocation is 6% which I think is not huge.
So basically, VGRO has a very slightly higher MER of around 0.05 and as far as the performance is considered, both VGRO & XGRO will perform more or less the same.
If you want to save 0.05% on MER, you can buy XGRO going forward. But selling VGRO and XGRO is a No Brainer for me.
Both these ETFs are extremely popular and it’s very hard to differentiate as which is better than the other.
What I always believe in while analyzing is the market returns (at least for the previous 5 years or more – Short term no use) and the actual fundamentals.
Result: VGRO is a clear winner over XGRO for the “Maximum Timeframe” – greater than 5 years
XGRO vs. XIC
While XGRO and XIC are both from the same fund house, BlackRock, yet, one of them is clearly better than the other.
Now, which one is it?
The Result: It’s XIC.
XGRO vs. VCN
VCN is from the Vanguard fund house. It’s one of the more popular ETFs in Canada.
Now, let’s compare XGRO with VCN and see the end result.
Result: Tie (not much difference at all)
Finally, let’s do one last comparison, this time with an S&P 500 Index Fund – VFV
XGRO vs. VFV
Again, XGRO is from BlackRock, while VFV is from Vanguard.
In case you don’t know, VFV is an S&P 500 Index Fund (US).
Result: VFV wins by a huge margin. Look below for yourself!
S&P 500 Index ETF funds are always considered the benchmark for the market returns. So, no surprises here with the result.
XGRO Vs. ZGRO
First of all, when comparing XGRO and ZGRO, the first thing to note is that ZGRO is an ETF from BMO.
Let’s quickly compare the market returns of XGRO vs. ZGRO here: (maximum time frame).
As you can see from the above charts, BMO’s ZGRO and XGRO both have almost the same market returns in terms of performance.
ZGRO uses an S&P500 fund for their US holdings which some would argue is poorly diversified vs a total market fund as Vanguard does.
ZGRO’s international holdings should be slightly more tax-efficient (slightly better returns, you won’t pay them directly) since they hold more directly vs Vandguards layers of ETFs.
With that said, ZGRO has failed to attract much volume so far, so I personally wouldn’t use them for that reason alone.
It’s, unfortunately, kind of a chicken vs egg situation in that regard. They could probably fix this by offering free ETF purchases for BMO ETFs through BMO InvestorLine (assuming that isn’t an illegal antitrust thing)… At their current level of assets under management, ZGRO likely isn’t profitable for them.
XGRO vs. Others
XGRO is the sweet spot of effort vs. reward. You could do more work, but you don’t really have to.
XAW / VCN / ZAG: MER .15 | Risk: Medium
XGRO: MER .25 | Risk: Low
TD eSeries: MER .5 | Risk: Medium
ROBO MER: .8 | Risk: Low
Tangerine MER: 1.1 | Risk: Low
There you go, that was my in-depth take on the XGRO ETF. It’s extremely well-diversified and looks very promising for the longer term.
I’ve honestly covered everything I could in this review to help you make the decision.
The final question you might ask me – Will I buy XGRO if given a choice or would I be interested in adding this to my portfolio?
My answer is a clear “NO”.
On this blog I cater to a larger audience who might be interested in the XGRO, I am not against BlackRock or XGRO – It’s just not for me and my investment type. That’s all. I like risk-taking and gaining more returns. That’s just me.
Finally, XGRO is well diversified across sectors – US, Canada, EU, Asia and Emerging Markets. It looks like a good deal with a low MER and expense ratio. The final choice is you as an investor – your risk appetite, the returns you expect, safety etc.
Anyways, thanks for reading. Let me know your thoughts and comments below.
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.