iShares Core Growth or XGRO is one of the best growth ETFs in the BlackRock fund house. The current NAV (net asset value) of XGRO stands at CAD 22.10, at the time of writing this article. The market’s year-to-date (YTD) return is 4.81%. XGRO has a risk indicator of low to medium by BlackRock Fund House.
Do not think of XGRO/VGRO as a single fund, as they are funds of funds. I like XGRO over VGRO because XGRO is more heavily invested in US stocks and has a lower MER. I also offer pre-authorized purchase plans with the TD e Series funds, but I’ll probably pull out of that and just buy the ETFs on WealthSimple Trade.
For example, XGRO is made up of 8 other ETFs, so whether you buy these ETFs individually or buy XGRO, you still own the same portfolio. Having an all-in-one fund doesn’t mean “putting all your eggs in one basket”, in case that’s what’s on your mind. In this article, let’s take a look at everything XGRO has to offer, in terms of diversity, features, market returns, dividends, market sector exposure, and more. Now let’s get started.
What is XGRO?
First of all, why XGRO?
When you have a bunch of interesting Canadian ETFs and mutuals, why choose XGRO? What makes it attractive to the end user like you and me?
As I said earlier, XGRO is owned by the fund company BlackRock. In case you don’t know, BlackRock is one of the best fund companies in the world along with Vanguard and others.
While fund company BlackRock has hundreds of excellent ETFs in its portfolio, XGRO is one of them.
Why XGRO?
With VGRO or XGRO you can almost flip a coin. Personally, I’d lean towards XGRO for the lower MER, slightly higher US/less Canadian allocation, and DRIP option.
Otherwise, you can’t go wrong with either and they will perform very well in the long run. FWIW, when you backtest XGRO vs VGRO over 25 years, XGRO performed slightly better at 7.49% compared to 7.22% with VGRO.
One should go for the TD e-Series if they highly value automating the process as much as possible because you can set up a Pre-Authorized Purchasing Plan (PPP).
The benefit is that when you automate things, you’re more likely to be disciplined and stick to your plan. If you think you can be disciplined and consistent in buying ETF shares regularly, then I would go in that direction.
-
By investing in XGRO, you’ll end up having exposure to a portfolio of ETFs broadly diversified by asset class and region, in one convenient package.
-
XGRO is continuously monitored by asset managers and automatically rebalanced, if necessary, to maintain target asset class weightings.
-
The management fee is just 0.18% and the MER is 0.20% (management expense ratio), which is best in class for all exchange traded funds (ETFs).
Characteristics of the XGRO ETF
First of all, in case you didn’t know, XGRO accepts investments through DRIP, PACC, and SWP.
The dividend yield is 2.43% or $0.13 and is paid quarterly.
Quick view of XGRO Fund Facts:
-
Net assets: 428,671,350 CAD (428 million)
-
Start/creation date: June 21, 2007
-
Exchange: Toronto Stock Exchange (TSX)
-
Asset class: Multi-asset
-
End of financial year: December 31, 2019
-
Rebalancing frequency: Quarterly
-
Units in circulation: 19,400,000 (19 million)
-
Number of titles: 8
-
Price: 22.11 CAD
XGRO’s Top 10 Stocks
XGRO invests internally in other companies and ETFs under the management of BlackRock Fund to generate returns for investors.
Now, what are these investments?
As you can see from the chart above, almost 38% of your money in XGRO goes to ITOT, which is an S&P Total US market fund.
While ITOT’s cumulative returns are 8.45%, the expense ratio is excellent at just 0.03%.
Let’s briefly look at the ITOT returns for the maximum period:
As you can see, the feedback has been excellent! This is because US markets as a whole have performed extremely well in recent months.
Then, 19.13% of your XGRO money is invested in XIC.
Now, XIC is another excellent ETF from the house of BlackRock Fund. With XIC, you will virtually own the entire Canadian stock market.
XIC returns a snapshot: (Maximum delay)
This now represents 60% of your money invested through XGRO in ITOT and XIC.
Next is XEF, with a 19.5% allocation. Now, what is this XEF?
XEF is another ETF from fund company BlackRock that contains over 1,500 stocks from Europe, Asia and Australia. The cumulative returns of the XEF fund are not very good and are negative at -2.5%.
XEF Chart: (Market Returns)
So this is where 80% of your XGRO money is invested.
The rest of the money is invested in XBB, emerging markets and hedge funds for (USD/CAD trades).
All I can say here is that the money you invest in XGRO is extremely well diversified with good geographic exposure. Let’s continue.
XGRO Exposure Breakdown
Even though the majority of the money invested by XGRO is in stocks, almost 18.59% of your money is also invested in fixed income, with cash at 0.20%.
XGRO ETF Performance
Below is XGRO’s market performance:
Please note that I have taken into account calendar year returns so that it helps you know the market returns more transparently and better understand the returns you can expect: (average)
| 2015 | 2016 | 2017 | 2018 | 2019 | |
|---|---|---|---|---|---|
| Total return | 0.96 | 10.12 | 11:78 a.m. | -6.24 | 17.96 |
XGRO vs. VGRO
Alright, first of all, while XGRO comes from BlackRock, VGRO comes from Vanguard.
For the record, the creation date of VGRO is January 24, 2018 and that of XGRO is December 11, 2018.
First, VGRO’s MER is 0.25 while XGRO’s management fee is 0.18.
Regarding the performance of the United States compared to Canada, this has been true for several years. But we cannot predict how the United States will behave in the long term over the next 20 years or more. Also, the allocation difference is 6%, which I don’t think is huge.
So basically VGRO has a very slightly higher MER of around 0.05 and performance wise both VGRO and XGRO will have more or less the same performance.
If you want to save 0.05% on MER, you can now buy XGRO. But selling VGRO and XGRO is a no-brainer for me.
Both of these ETFs are extremely popular and it is very difficult to differentiate which one is better than the other.
What I always believe in when analyzing are market returns (at least for the last 5 years or so – short term, useless) and real fundamentals.
Result: VGRO is a clear winner over XGRO for “maximum time frame” – greater than 5 years
XGRO vs. XIC
Although both XGRO and XIC are owned by the same fund company, BlackRock, one of them is clearly better than the other.
Now which one is it?
The result: It’s XIC.
XGRO vs. VCN
VCN comes from the fund company Vanguard. It is one of the most popular ETFs in Canada.
Now let’s compare XGRO with VCN and see the final result.
Result: Tie (not much difference)
Finally, let’s make one last comparison, this time with an S&P 500 index fund – VFV
XGRO vs. VFV
Again, XGRO comes from BlackRock, while VFV comes from Vanguard.
In case you don’t know, VFV is an S&P 500 (US) index fund.
Result: VFV wins by a large margin. Watch below for yourself!
S&P 500 Index ETF funds are still considered the benchmark for market returns. So, no surprise here with the result.
XGRO Vs. ZGRO
First of all, when comparing XGRO and ZGRO, the first thing to note is that ZGRO is a BMO ETF.
Let’s quickly compare the market returns of XGRO versus ZGRO here: (maximum time frame).
As you can see from the charts above, BMO’s ZGRO and XGRO both have almost the same stock returns in terms of performance.
ZGRO uses an S&P500 fund for its U.S. holdings which some say is poorly diversified compared to a total market fund like Vanguard does.
ZGRO’s international holdings should be slightly more tax efficient (slightly better returns, you won’t pay them directly) because they hold more directly than the Vanguards ETF layers.
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 versus egg situation in this regard. They could probably solve this problem by offering free purchases of BMO ETFs through BMO InvestorLine (assuming this is not an illegal antitrust action)… At their current level of assets under management, ZGRO is probably not profitable for them.
XGRO versus others
XGRO is the sweet spot between effort and reward. You could do more work, but it’s not really required.
XAW/VCN/ZAG: WED .15 | Risk: medium
XGRO: WED .25 | Risk: Low
TD e Series: RFG 0.5 | Risk: medium
ROBOMER: .8 | Risk: Low
MER Tangerine: 1.1 | Risk: Low
Last words
So there you have it, that was my in-depth take on the XGRO ETF. It is extremely well diversified and looks very promising in the long term.
Honestly, I covered everything I could in this review to help you make the decision.
The last question you might ask me: Would I buy XGRO if given the choice or would I be interested in adding it to my portfolio?
My answer is a clear “NO”.
On this blog I’m speaking to a wider audience who might be interested in XGRO, I’m not against BlackRock or XGRO – it’s just not for me and my type of investment. That’s all. I like to take risks and get more returns. It’s just me.
Finally, XGRO is well diversified across all sectors: US, Canada, EU, Asia and emerging markets. This seems like a good deal with a low MER and expense ratio. The final choice is you as an investor: your appetite for risk, the returns you expect, security, etc.
Thanks for reading. Please let me know your thoughts and comments below.
