Investing in exchange-traded funds (ETFs) is a solid long-term strategy for most investors. Generally, ETFs offer diversification at a low-cost and aim to deliver inflation-beating returns over time. One such ETF is iShares Core MSCI EAFE IMI Index ETF (TSX:XEF), which trades on the Toronto Stock Exchange.
Most Canadian investors have a sizeable exposure to Canadian bank and energy stocks. A few also hold U.S. tech stocks in their portfolios to capitalize on the AI (artificial intelligence) megatrend.
However, Europe, Australia, and Asia are also home to some of the most established companies on the planet that you should consider owning in 2026.
XEF is built to close that gap for Canadian investors with a single purchase. The fund aims to replicate the MSCI EAFE Investable Market Index, net of expenses, giving investors direct access to developed markets outside North America.
As of May 2026, the fund held 2,528 individual positions, according to the fund’s fact sheet. That’s a level of diversification I could never build stock by stock, even if I spent years trying.
The XEF ETF is ideal for investors seeking capital growth and planning to hold the fund over the long term.
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What you own inside this ETF
Geographically, the fund leans heavily into Japan, which accounts for 26.02% of the portfolio in May 2026. The United Kingdom is next at 14.50%, with France, Germany, Switzerland, and Australia each accounting for meaningful slices.
The fund’s top holdings read like a list of the world’s most durable businesses, including ASML Holding, HSBC Holdings, Roche, AstraZeneca, Novartis, Nestle, and Shell.
I like owning durable, recession-resistant businesses like Nestle without needing to open a separate international brokerage account or worrying about currency conversion fees on every trade.
Here’s where the case gets simple. According to the fund’s May 2026 fact sheet, a hypothetical $10,000 invested at the fund’s April 2013 launch had grown to $35,059.75 by the end of May 2026. That’s more than triple the original investment, including reinvested distributions.
The fund returned 23.63% over the one-year period ending May 2026 and 18.70% annualized over three years. Even the 10-year annualized return was 9.71%, a solid outcome for a fund that tracks an index.
XEF is a low-cost index fund
This is the part that should convince you to make XEF a permanent piece of your portfolio. The management expense ratio sits at just 0.23%. So, an investment of $10,000 translates to $23 a year in expenses.
Compare that to the cost of buying dozens of individual international stocks yourself, paying commissions on each trade, and trying to rebalance a portfolio across a dozen currencies.
The fund also trades with an average bid-ask spread of just 0.04%, covering the twelve months ending April 2025. In plain terms, it’s easy to buy and sell without losing money to a wide gap between prices.
XEF may not be the best-performing fund in the next year or even the next decade. However, it gives you instant exposure to thousands of international businesses, at a cost that barely registers, with a track record that stretches back over a decade.
