iShares Core S&P 500 Index ETF (XUS) Review
On our journey to analyze some of the most popular exchange-traded funds (ETFs) in the investment world, we talked about BMO ETFs and Vanguard ETFs so far. However, this effort will not be complete without BlackRock iShares ETFs, which is the leading ETF manager in the world. To add some context to this claim, BlackRock boasts 389 different ETFs in the US market and 157 ETFs in Canada. These are more than its rival BMO and Vanguard ETF counts put together. In this article, we will be exploring the infamous iShares Core S&P 500 Index ETF, ticker symbol; XUS, listed in the Toronto Stock Exchange (TSX).
With over $2 trillion in assets under management and over 900 investment products, BlackRock is one of the leading players in the fund management game. This gives them the luxury of dropping their management fees and further attracting investors. In 2019, BlackRock entered into a strategic alliance with Canada’s RBC Global Asset Management to introduce the iShares brand for ETFs.
The BlackRock iShares Core S&P 500 Index ETF (XUS) is as classic as they come. Every fund management company has its own fund that tracks the performance of the infamous S&P 500 Index. XUS does just that for iShares and for Canadian investors looking to get exposure to the US market.
The TLDR of S&P 500 Index: a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States. It is one of the most followed and replicated indices in the world. There are several criteria that a company must pass to be eligible to be entered into this index. Unsurprisingly, S&P 500 Index has given sustainable returns over the years. Since its inception in 1970, the index has given an average annual return of around 10%.
| Quick Facts | VFV.TO |
|---|---|
| Fund inception date | April 10, 2013 |
| Net Assets (Oct 31, 2021) | $4.8 billion |
| Exchange | Toronto Stock Exchange |
| Annualized distributions yield | 0.85% |
| Distribution frequency | Semi-annually |
| Management expense ratio | 0.1% |
| Account eligibility | TSFA/RRSP/RESP/RRIF/DPSP |
For Canadians, investing in the US stock market comes with a few complications. From holding USD in a Canadian account to currency translation fees by brokers and even receiving distributions getting charged with withholding taxes. So, it is much easier to invest in an index fund incorporated in Canada that tracks a US index. This is exactly what XUS does.
According to iShares, the risk level of XUS is categorized as low to medium. This is likely due to the fact that the S&P 500 Index only gives exposure to the US as geography and also its growing tilt towards Information Technology.
iShares Core S&P 500 Index ETF (XUS) Holdings
iShares is able to keep the costs of XUS low by investing in its own S&P 500 Index ETF designed for the US. This ETF trades under the ticker symbol IVV in the United States and 95% of XUS’s holdings consist of this ETF. This reduces the workload of the XUS managers.
The balance 5% of XUS is invested in the same companies that S&P 500 Index holds, in their proportional weights. Below are the top 10 holdings on XUS ETF as of December 6, 2021.
| Holding Name | Weightage |
|---|---|
| iShares Core S&P 500 ETF (IVV) | 95.27% |
| Apple Inc. | 0.31% |
| Microsoft Corp. | 0.29% |
| Amazon.com Inc. | 0.18% |
| Alphabet Inc. Class A | 0.10% |
| Tesla Inc. | 0.10% |
| Alphabet Inc. Class C | 0.09% |
| Facebook Inc. Class A | 0.09% |
| NVIDIA Corp. | 0.09% |
| Berkshire Hathaway Inc. Class B | 0.06% |
These holdings represent nothing more than the constituents of the S&P 500 Index and their weights. The majority of the weight is on the Informational Technology sector at about 28.7%. The Consumer Discretionary sector accounts for about 12.86% of the asset allocation, followed by the Health care sector with 12.72% allocation.
iShares Core S&P 500 Index ETF (XUS) Performance
XUS has an annual yield of 0.85% at the moment. This is nothing to brag about in the investment community. However, XUS is not meant to be used as an income fund. It is meant to be used as a growth fund or one that will give you capital appreciation over the long run. The income distribution of 0.85% is just a bonus.
Since its inception, the iShares Core S&P 500 Index has seen 316% returns until December 6, 2021. This means an initial investment of $10,000 would have grown into a cool $41,740 by now. This incredible growth does not necessarily reflect the all-time performance of the S&P 500 Index. This is due to the fact that the index has seen a tech-backed bull run in the past decade.
This graph is as mouth-watering as it gets for a long-term value investor.
Is XUS ETF for You?
For any long-term growth investor, the S&P 500 Index is a must-have in their portfolio. It represents the biggest and the strongest companies in the United States, and that is something. If you have a rather long time horizon to invest, the S&P 500 Index is a sure bet for steady and recurring gains. XUS is nothing but a mirror of this index and one of the ideal candidates for Canadian investors to get into the US market.
Check out the latest information about the fund on iShares.
Disclosure: Any information given in this article is not to be construed as investment advice. You must do your own research before investing any money in the stock market. All investments carry inherent risks even with the possibility of losing all your money.
