One of the biggest challenges in investing is deciding what to buy in your portfolio. Fortunately, the right ETF can make that decision much easier. Buying a diversified ETF provides an alternative to concentrating a portfolio on just a few individual stocks.
Instead, in buying this ETF, investors are buying a broad slice of Canada’s largest companies. That makes investing simpler while adding instant diversification.
The iShares S&P/TSX 60 Index ETF (TSX:XIU) is that ETF. It gives investors a simple way to own many of Canada’s largest and most important companies in a single investment.
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Why this ETF is built for long-term investors
The iShares S&P/TSX60 gives investors exposure to Canada’s largest and most important companies in one ticker. This makes it one of those rare investments that fit into any long-term portfolio.
That’s an important advantage because banking, energy, pipelines, materials, utilities and telecoms make up a large part of the Canadian market.
Rather than guessing the winners from those sectors and watching them over the next decade, this ETF allows investors to own a slice of that group. That makes the ETF a useful option for investors who want that Canadian blue-chip exposure without any complex decision-making.
As a long-term holding, that’s the main reason I’m buying this ETF. It doesn’t need constant trading, and it’s not built on hype. Instead, it’s a simple basket of the most established and profitable businesses in the country.
For investors who want less maintenance, that set-and-forget appeal is a major advantage.
Perhaps one of the best things about the iShares S&P/TSX60 is how much exposure investors get with one purchase.
The ETF covers the main sectors of the economy, and many of its holdings have paid dividends for decades. Even better, many of those picks are among the most defensive and essential to the Canadian economy.
That diversification is a huge advantage.
The yield is modest, but the bigger story is compounding
Speaking of dividends, the ETF does pay a quarterly distribution, but investors should note that income isn’t the goal of this fund. As of the time of writing, the annual yield works out to 2.2%.
Investors should focus on the ETF’s total return instead of that yield alone. While there is some income that is distributed along the way, the bigger opportunity comes in the form of the fund’s long-term compounding potential.
By way of example, as of the time of writing, the fund has provided an impressive 30% return over the prior 12-month period.
Investors can reinvest that modest yield into more units and grow the position into a larger income-producing asset.
In other words, buying this ETF is appealing to long-term investors.
Why buying this ETF beats timing the market
In my opinion, buying this ETF is more about building a long-term position that I keep adding to rather than buying it at any price. That’s the advantage of investing in a fund like the iShares S&P/TSX 60.
Investors don’t need the perfect headline, the perfect valuation, or the perfect economic backdrop. They can build a position slowly over time.
That helps during times of market volatility. When prices fall, the next contribution buys more units. When markets recover, the exposure is already there.
That beats trying to time the market. And that’s why I’m buying this ETF.
The ETF isn’t going to grab attention the way a high-growth stock or high-yield dividend stock might. But that is exactly why I like it.
Buy it, hold it, and watch your long-term portfolio grow.
