Have you been finding the stock market stressful this year?
If so, you’re not alone in feeling that way. Although 2025 has largely been a bullish year, it has seen considerable volatility along the way – especially in the United States.
On April 2, Donald Trump announced his “reciprocal tariff” policy, which imposed high duties on most of the world’s nations. It immediately triggered economic pandemonium, with U.S.-China trade grinding to a halt and U.S. treasury yields rising so much that it created trouble with treasury actions. Predictably, the U.S. markets (and to a lesser extent global markets) sold off when these events transpired, eventually leading to Donald Trump walking back many of his threatened tariffs.
It was a scary time for many, and while markets later recovered, some still fear volatility like that seen earlier in the year, re-emerging in the later part. If that sounds like you, then read on, because I am about to share a low-risk, highly diversified, low-cost index fund that makes for a relatively stress-free investing experience.
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iShares S&P/TSX 60 Index Fund
The iShares S&P/TSX 60 Index Fund (TSX:XIU) is a Canadian index ETF built on the TSX 60, the 60 largest TSX stocks by market cap. The fund holds 60 stocks, representing every major sector of the Canadian economy: technology, financials, energy, utilities and more. The fund also has a pretty low management fee (0.16%), making it a fairly economical investment option.
XIU has most of the main characteristics that academic research says makes for a great investment. These include:
- Diversification. XIU’s portfolio has a sizable number of stocks, as well as stocks in different, uncorrelated industries.
- High trading volume. High trading volume helps an index fund track its underlying index well, and spares investors the fate of paying excessive hidden fees to market makers.
- Low fees (0.15% management fee and a 0.18% management expense ratio).
- A reasonable amount of dividend income (2.6% yield).
Overall, there’s much for investors with many differing risk profiles and time horizons to like here.
Why it helps you sleep like a baby at night
Earlier, I claimed that holding XIU would help you sleep like a baby. A little clarification on that is in order. When I say that XIU will allow you to sleep soundly at night, what I mean is that if you understand the fund, you will sleep soundly knowing that it is much less risky than the average individual stock. Instead of stressing about one penny stock you’ve chosen to “go all in” on, you’ll know that you have the proven benefits of diversification working for you when you hold XIU.
Why is that?
Because XIU – like many other index funds – is diversified. Unlike holding an individual stock – which is like putting all of your eggs in one basket – holding XIU spreads your “eggs” across many baskets. Because of this, you can afford to have one stock in XIU’s portfolio perform poorly, and still do alright. In fact, you can have one perform extremely poorly, and do extremely well! Sixty stocks is a considerable amount of diversification, and while there’s some concentration risk in XIU (i.e., its top holdings having heavy weightings), it’s not so extreme that the fund would collapse if, say, Royal Bank of Canada had a bad quarter.
Foolish takeaway on the XIU ETF
The XIU ETF is the type of classic broad market fund that academic research indicates will perform best for most people. Diversified, well managed and cheap, it is likely a good fit for many different groups of Canadian investors.
