If you want to stop stressing over which stocks to buy, which country will outperform next, or which sector is about to become the hottest investment trend, it may be worth taking a step back.
For many Canadians, one of the simplest approaches is just holding an all-in-one asset allocation exchange-traded fund (ETF) inside a Tax-Free Savings Account (TFSA). That sounds more complicated than it actually is.
An all-in-one ETF is essentially a single investment that handles nearly everything for you. It selects and weights stocks across different markets, automatically rebalances the portfolio over time, collects dividends, and keeps compounding in the background. Once you buy it, your main job is simply continuing to add money consistently and holding it for the long term.
There are several options available today, but one of the most popular among Canadian investors has been the iShares Core Equity ETF Portfolio (TSX: XEQT). The fund has become so well known that it even has its own Reddit community: r/JustBuyXEQT. Here’s why it has built such a strong following.
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What is XEQT?
XEQT is what’s known as a “fund of funds.” Instead of directly holding individual stocks itself, the ETF primarily owns several underlying low-cost iShares index ETFs that collectively provide exposure to thousands of companies around the world.
Right now, the portfolio is allocated roughly: 45% U.S. equities, 25% Canadian equities, 25% international developed markets, 5% emerging markets. The portfolio is also periodically rebalanced to maintain those target allocations over time.
That diversification matters because it helps reduce concentration risk. If one country or region underperforms for a period of time, the entire portfolio is not dependent on a single market for returns. In total, XEQT provides exposure to thousands of stocks globally in a single ETF purchase.
The yield itself is not particularly high at roughly 1.53% on a trailing 12-month basis. But income is not really the primary goal here. XEQT is designed more for long-term total return and capital appreciation. On that front, the ETF has delivered fairly strong results. Over the past five years, XEQT generated annualized returns of roughly 13.2%.
The fees are extremely low
Another major reason XEQT has become so popular is its low management expense ratio, commonly referred to as the MER. The MER represents the annual fee deducted from the fund to cover management and operating expenses.
Investors do not directly pay this fee out of pocket. Instead, it is quietly deducted in the background and expressed as a percentage of your investment, reducing your returns over time
XEQT currently charges a 0.20% MER. That means if you invested $10,000 into the ETF, the annual fee drag would work out to roughly $20 a year. That is extremely competitive for a globally diversified all-in-one ETF portfolio.
Scale also helps here. XEQT now manages roughly $17.5 billion in assets, making it one of the dominant all-in-one ETF products in Canada today. For long-term TFSA investors, simplicity, diversification, and low fees can often matter more than trying to constantly chase the next winning stock or sector.
