Got $500 to Invest? Put it in This ETF

Canadian investors can start investing simply through this ETF, which provides immediate diversification and long-term growth potential.

Kay Ng

Author Bio

Kay graduated from the University of British Columbia with a Bachelor of Science in Computer Science and furthered her studies in financial markets, finance, and financial accounting. She began investing in dividend stocks in 2008, turning an early interest into a lasting passion. Over the years, Kay has refined her investment approach to focus on high-quality businesses, using fundamental analysis and valuation to identify long-term investment opportunities. Her investment research and articles have been featured in The Motley Fool, Sure Dividend, and Seeking Alpha. Outside of investing, Kay enjoys playing the piano, from popular songs learned by ear to challenging classical compositions. Her favourites include Fantaisie-Impromptu by Frédéric Chopin and La Campanella by Franz Liszt.

Education

Bachelor of Science (BSc) in Computer Science, University of British Columbia Further studies in financial markets, finance, and financial accounting

Areas of Expertise

Dividend stocks, fundamental analysis, company valuation, quality investing, long-term investing, business fundamentals, and identifying investment opportunities in high-quality companies.

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Favorite Investment Quotes

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett

Published September 24, 2024 10:00 am EDT

If you have $500 to invest, consider putting it into an exchange-traded fund (ETF) like iShares MSCI World Index ETF (TSX: XWD). This ETF offers a simple and effective way to diversify your portfolio while gaining exposure to a broad range of equities across developed markets worldwide. With its low management expense ratio (MER) and strategic asset allocation, XWD can serve as a solid foundation for long-term wealth creation.

exchange traded funds — Image source: Getty Images

Why choose iShares MSCI World Index ETF?

iShares MSCI World Index ETF offers robust diversification and focus on large- and mid-cap companies. With only a modest domestic exposure, it allows Canadian investors to mitigate bias toward local markets. The ETF’s MER is competitively at 0.48%, making it an affordable option for those just starting investing.

Investing in XWD means tapping into a well-rounded portfolio that spans various sectors. Its geographical distribution provides access to markets that you might otherwise overlook. The investment enables investors to harness growth potential from diverse economies. By investing in this ETF, you’re not just purchasing shares — you’re gaining entry into a world of opportunities across multiple industries.

A breakdown of XWD holdings and sector exposure

One of the most attractive features of iShares MSCI World Index ETF is its well-thought-out allocation of assets. Approximately 72% of the fund is invested in iShares Core S&P 500 ETF, which captures the performance of the 500 largest U.S. stocks by market capitalization. This segment is essential for those looking for long-term growth, as it encompasses leading companies across various sectors, including technology, healthcare, and consumer goods.

The ETF also allocates about 25% to iShares MSCI EAFE ETF, offering investors exposure to over 900 companies in Europe, Australia, Asia, and the Far East. This geographical diversification is crucial in today’s interconnected world, allowing investors to spread risk and capitalize on global growth trends. The remaining 3% is allocated to iShares S&P/TSX 60 Index ETF, which focuses on large Canadian companies, ensuring that investors still have a stake in their home market.

In terms of sector exposure, XWD is balanced well. The fund’s allocation includes under 25% in information technology, nearly 16% in financials, about 12% in healthcare, and a variety of other sectors like industrials and consumer discretionary. This mix allows for a well-rounded investment that can withstand market fluctuations while providing avenues for potential growth.

Building a sustainable investment strategy

Investing $500 in iShares MSCI World Index ETF is an excellent start for those seeking both diversification and long-term growth in international equities. However, the key to creating meaningful wealth lies in building a disciplined investment habit. For example, if possible, aim to save and invest $500 every month. This strategy, known as dollar-cost averaging, helps you navigate market volatility by spreading your investment over time.

Moreover, being proactive during market corrections can also enhance your portfolio performance. If the market dips, consider investing more, as this approach can yield significant benefits when the market rebounds.

Additionally, as your financial situation evolves, you can explore adding sector-specific ETFs or individual stocks based on your investment goals. For instance, if you’re looking for immediate income, sectors like utilities or real estate may be worth exploring.

The Foolish investor takeaway

iShares MSCI World Index ETF is a logical choice for Canadian investors, starting with $500. Its comprehensive diversification and low expense ratio make it an attractive vehicle for long-term growth. By committing to regular investments and remaining adaptable to market changes, you can cultivate a portfolio that not only meets your financial goals but also positions you for lasting success.