Canadians don’t need substantial capital to invest in the Toronto Stock Exchange. You can invest in stocks and other tradeable options like real estate investment trusts (REITs) and exchange-traded funds (ETFs). The latter has risen in popularity because of the incredible benefits, especially diversification and risk management.
If there are buy-and-hold stocks, there are ETFs for long-term investors, too. A top ETF to own forever is iShares S&P/TSX 60 Index ETF (TSX:XIU). Even a $2,000 investment is enough to take a position and stay in the market for the long haul.
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TSX Pioneer
BlackRock Asset Management Canada Limited is the fund manager for the iShares S&P/TSX 60 Index ETF. XIU replicates the performance of the S&P/TSX 60 Index (net of expenses) and is ideal for investors seeking long-term capital growth and income streams.
According to BlackRock, XIU started trading in 1990 and is the world’s first ETF. It is one of the largest ($15.7 billion in net assets) and most liquid Canadian ETFs today. Only healthcare among the 11 TSX primary sectors has no representation. Because of the diversified exposure, the risk rating is medium.
Exposure and holdings
The Fund’s exposure is most significant in TSX’s two heavyweight sectors: financial (36.4%) and energy (16.8%). Information technology (11.2%), the top performer thus far in 2024 with 38.5%-plus year-to-date, is well represented. Shopify and Constellation Software are the top high-growth sector holdings.
The portfolio has 60 stock holdings (obviously), including banking giants the Royal Bank of Canada, Toronto Dominion Bank and the four others in the Big Six. Energy stalwarts Enbridge and Canadian Natural Resources are in the basket. Railroad operator Canadian Pacific Kansas City Limited in the industrial sector (+11.05%) is a top 10 holding.
Distribution: Yield and frequency
As of December 11, 2024, XIU trades at $38.83 per share or unit. The year-to-date gain is 25.1%-plus compared to the TSX’s 22.4%-plus. Also, the overall return in five years is a decent 77.66%-plus, a compound annual growth rate (CAGR) of 12.2%). If you invest today, the dividend yield is 3.3%, while the payout frequency is quarterly. A $2,000 investment converts to $16.35 in quarterly passive income.
TSX Outlook
The Bank of Canada has reduced its benchmark rate five times this year; the latest was December 10. Many market analysts and experts forecast the TSX to perform better than the S&P 500 Index in 2025. Brian Belski, BMO chief investment strategist, said in a BNN Bloomberg interview, “We think Canada offers value and cyclicality and increase in stock picking, especially relative to the U.S.”
Belski’s team forecast 28,500 by year-end 2025. For longforecast.com, the low-to-high range is between 31,228 and 35,928. The TSX has achieved multiple high records in 2024, and the momentum should carry over into the following year. Given the bright outlook for Canadian stocks, many of the XIU’s holdings will likely outperform. An ETF tracking the S&P/TSX 60 Index is the ultimate beneficiary.
