Tag Archives: Financial Independence

XEQT Review: An iShares All-Equity ETF Analysis

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By Bob Lai, Tawcan

Special to the Financial Independence Hub

A while ago, I wrote a VEQT review where I performed a thorough and deep analysis of the Vanguard All-Equity ETF. While I really like VEQT, we ended up buying XEQT for our kids’ RESPs due to a few key reasons. The beauty of a one-fund solution ETF such as the iShares All-Equity ETF (XEQT) means there’s no need to re-balance regularly. This makes it a very straightforward and simple investment approach. More importantly, the all-in-one ETFs provide instant asset class diversification and geographical diversification, all for a very low management fee.

Vanguard and iShares are two of the most well established and most trusted ETF companies in the world. Both companies offer similar all-equity ETFs – VEQT and XEQT, respectively. Lately, when I’m coaching clients new to investing, I’d typically recommend XEQT to them because of the lower MER fee compared to VEQT.

Although XEQT is great for beginner investors, this all-equity ETF is just as good for experienced investors. This ETF definitely has a place in most investors’ portfolios.

Having written a VEQT review, I figured I needed to write a similar review for XEQT so readers can compare the two side-by-side.

Table of Contents
iShares All-Equity ETF – XEQT
XEQT Fees
XEQT Underlying Holdings
XEQT Top 10 Market Allocation
XEQT Top 10 Holdings

XEQT Sector Exposure

XEQT Returns
XEQT Distributions
Foreign Withholding Tax with XEQT
XEQT Review – Pros and Cons of XEQT
Pros of XEQT
Cons of XEQT
XEQT vs. VEQT

iShares XEQT vs. Other iShares ETF Funds

XEQT vs. XGRO
XEQT vs. XIC
XEQT vs. XAW
XEQT vs. ITOT
Who should buy XEQT?
Summary – XEQT Review

iShares All-Equity ETF – XEQT

The iShares All-Equity ETF Portfolio, XEQT, holds 100% in equity. This means that the ETF holds no bonds. iShares have several all-in-one ETFs and XEQT falls in the more volatile, riskier spectrum of all the all-in-one ETFs because XEQT holds 100% in stocks.

XEQT seeks to provide long-term capital growth by investing primarily in one or more exchange-traded funds managed by BlackRock Canada, or an affiliate that provides exposure to equity securities. Just like its counterpart all-in-one ETFs, iShare All-Equity ETF trades on the Toronto Stock Exchange under the ticker name “XEQT” and is traded in Canadian dollars.

XEQT is a relatively new ETF. It was created in Aug 2019. Some key facts of XEQT:

  • Inception Date: Aug 7, 2019
  • Eligibility: RRSP, RRIF, RESP, TFSA, DPSP, RDSP, taxable
  • Dividend Schedule: Quarterly
  • Management Fee: 0.18%
  • MER: 0.20%
  • Listing Currency: CAD
  • Exchange: Toronto Stock Exchange
  • Net Asset: $595.48M
  • Number of holdings: 4
  • The number of stocks: 9,444

XEQT Fees

XEQT has a management expense ratio (MER) of 0.20%, which is 0.05% lower than VEQT. While 0.05% may not seem a lot, if your portfolio value is $250,000, it means $125 in fees each year. While it’s not an enormous amount of money when your portfolio is that big, it adds up eventually.

One thing to note is that the all-in-one and all-equity ETFs that Vanguard, iShares, and other ETF companies all have very low management fees. These management fees are typically much, much lower than the MER on the typical mutual funds available to Canadians. The low MER is one of the key reasons why index ETFs are excellent investment options for Canadians.

If you use a discount broker like Questrade, you can buy ETFs commission free. This would reduce your overall transaction cost significantly. If you use Wealthsimple, you can also buy ETFs commission free.

Check out my Questrade vs. Wealthsimple Trade review to see which discount broker is best for you.

XEQT Underlying Holdings

Like other iShares all-in-one ETFs, XEQT holds four iShares ETFs which means that XEQT holds 9,033 stocks. The underlying holdings are:

  • iShares Core S&P Total US Stock (ITOT) – 48.02%
  • iShares MSCI EAFE IMI Index (XEF) – 24.39%
  • iShares S&P/TSX Capped Composite (XIC) – 22.71%
  • iShares Core MSCI Emerging Markets (IMEG) – 4.64%

The rest of the portfolio holds USD and CAD cash and/or derivatives.

XEQT Top 10 Market Allocation

Here is XEQT’s top 10 market allocation.

  • US: 47.13%
  • Canada: 23.79%
  • Japan: 5.37%
  • UK: 3.08%
  • Switzerland: 2.25%
  • France: 2.23%
  • Germany: 1.92%
  • Australia: 1.84%
  • China: 1.74%
  • Netherlands: 1.27%

The exposure to each country will vary month over month but the variations are typically in the fractions of a percentage. XEQT has a much higher exposure to the US market compared to VEQT. While XEQT has 8.89% exposure to other markets, iShares did not provide such information on the website. Continue Reading…

Overlooked retirement income and planning considerations

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By Mark Seed, MyOwnAdvisor

Special to the Financial Independence Hub

I’ve updated this retirement income planning post to reflect some current thoughts. Check it out!

I’ve mentioned this a few times on my site: there is a wealth of information about asset accumulation, how to save within your registered and non-registered accounts to plan for retirement. There is far less information about asset decumulation including approaches to earn income in retirement.

Thankfully there are a few great resources available to aspiring retirees and those in retirement – some of those resources I’ve written about before.

Retirement income and planning articles on my site:

One of my favourite books about generating retirement income is one by Daryl Diamond, The Retirement Income Blueprint. 

An article about creating a cash wedge as you open up the investment taps.

A review about The Real Retirement.

These are six big mistakes in retirement to avoid.

A review of how to generate Retirement Income for Life.

This is my bucket approach to earning income in retirement.

Here are 4 simple ways to generate more retirement income.

Can you have too much dividend income? (I doubt it!)

Other resources and drawdown ideas:

Instead of focusing on the 4% rule, you can drawdown your portfolio via Variable Percentage Withdrawal (VPW).

A reminder the 4% rule doesn’t work for everyone. Some people ignore the 4% rule altogether.

Getting older but my planning approach stays the same

As I get older, I’m gravitating more and more this aforementioned “bucket approach” for retirement income purposes. This bucket approach consists of three key buckets in our personal portfolio to address our needs:

  • a bucket of cash savings
  • a bucket of dividend paying stocks
  • a bucket of a few equity Exchange Traded Funds (ETFs).

My Own Advisor Bucket Approach May 2019

Retired Money: Can retired Boomers afford to be the BOMAD to their kids?

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My latest MoneySense Retired Money column looks at the question of whether almost-retired or already-retired Baby Boomer parents should provide financial assistance to their Millennial children seeking to get their first steps on the increasingly expensive housing ladder.

That is, is it wise for parents to cut into their own Retirement savings in order to become the BOMAD: the Bank of Mum and Dad?

It’s been said that 50 to 75% of millennials expect to tap the BOMAD for help coming up with a down payment.Click on the highlighted headline to retrieve the whole column: Should you help your adult children to buy Real Estate?

A couple of the column’s sources arose after I appeared on Patrick Francey’s The Everyday Millionaire podcast.

Francey is a seasoned entrepreneur and real estate investor who is CEO of REIN of the Real Estate Investment Network (REIN). These days, most REIN members who have at least one “door” (real estate investment property above and beyond a principal residence) are almost by definition millionaires. I appeared despite the fact our family owns no investment real estate, apart from REIT ETFs in a purely electronic portfolio: “clicks instead of bricks,” as I explained on the show.

REIN’s Patrick Francey, host of The Everyday Millionaire podcast

Interestingly, while he has helped his own kids with housing, Francey does not necessarily think parents should provide financial assistance to kids trying to break into the housing market: not if it jeopardizes their own retirement, and not if it means the kids will miss out on the character-building exercise of doing it on their own.

A similar stance came from retired mortgage broker and author Calum Ross, who also recently appeared on the podcast. Ross, of Toronto-based The Mortgage Management Group, has some experience with BOMAD as it relates to his two daughters.   “As a divorced Dad, BOMAD was restructured and now runs as a privately held entity BOD [Bank of Dad.],” Ross quips.

Ross says his parenting priorities are identical to how his parents raised him: 1) I taught them to be thoughtful, 2) I raised them with a work ethic, and 3) I taught them to save money and not spend it.

Adrian Mastracci, portfolio manager with Vancouver-based Lycos Asset Management, says BOMAD may be a great deal for the kids but Mum and Dad need to first ensure they have sufficient funding to see them through their retirement years. “Ensure that they can incur all expenses, health costs, effects of inflation, rising costs of providing for in-home services, a retirement home facility and rehabilitation costs of the current home.” Continue Reading…

Rethinking Retirement (RIP) and FIRE

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By Dale Roberts, cutthecrapinvesting

Special to the Financial Independence Hub

Today’s post will weave together retirement as seen in a more traditional sense and those who practice F.I.R.E. – an acronym for financial independence and retire early. In the Globe and Mail Brenda Bouw offered that the COVID pandemic is giving early retirees second thoughts, they’re going back to work. On FiPhysician, Dr. David Graham offers that traditional retirement is dead – RIP. The old approach will fall on its face. We might run out of money before we run out of time. We will also see how Justwealth has crushed mutual funds over the last five years. Enjoy. We’re rethinking retirement on the Sunday Reads.

We’ll start with rest in peace RIP retirement on FiPhysician. Or, is retirement an acronym? Of course on this site Dr. Graham inspired – how does the pandemic end?

Well, with the common cold.

We no longer work til we drop dead

That retirement piece shows how retirement risks have changed. We are no longer working until we drop dead Dr. Graham offers. We are living longer (generally are much more healthy) than past decades and centuries and we will spend decades in retirement. The traditional retirement funding approach used by our parents and grandparents will not get the job done. Traditionally, social security (CPP in Canada) a pension and home value would do the trick. That requires a re-think offers Dr. Graham.

For starters those government pension won’t keep up with ‘real inflation’ compared to what the government reports. Lots of fudging of ‘official’ numbers on that front.

So, with the three-legged stool of traditional retirement, you cannot keep up with inflation over longer periods of time. Retirement is an anachronism because you cannot fund it.

On the future of retirement and how we might best prepare …

Consider that which is currently changing the world of employment: smart phones and the gig economy.

You won’t retire in the future; you will monetize your hobby and have gigs from your smart phone. After all, we must move from a knowledge-based society to a wisdom-based one. Everyone has knowledge at the tip of their fingers all the time. Who has all the wisdom?

So funny, as I am personally living that now, and by design. I am living proof as are many in today’s new normal for “retirement”. I have the portfolio, I monetize any knowledge or wisdom that might have value. Any gov pension will be a bonus that will not be counted on in any meaningful way. We have real estate.

Protect the portfolio from inflation

I am also of the school that we can protect our portfolio income assets from inflation. And research shows that we need the true inflation fighters such as gold and other commodities and real assets. Continue Reading…

Two types of overconfident investors

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I started investing in individual stocks shortly after the Great Financial Crisis ended in 2009. I picked an investing strategy that closely resembled the Dogs of the TSX, buying the 10 highest yielding Canadian dividend stocks. As you can imagine, the share prices of these companies got hammered during the stock market crash so I was able to scoop up shares in banks, telecos, pipelines, and REITs on the cheap.

Stocks came roaring back right away and my portfolio gained 35% by the end of 2009. Investing is easy, right?

It took me a while to figure out that my portfolio returns had less to do with my stock picking prowess and more to do with market conditions, luck, and the timing of new contributions. The rising tide lifted all ships, including my handful of Canadian dividend stocks.

I started comparing my returns to an appropriate benchmark to see if my judgement was adding any value over simply buying a broad market index fund. My portfolio outperformed for a few years until it didn’t. In 2015, I had enough and switched to an index investing strategy. Now I invest in Vanguard’s All Equity ETF (VEQT) across all of my accounts.

Related: Exactly How I Invest My Money

New investors who started trading stocks in the past 18 months have likely had a similar experience. Stocks crashed hard in March 2020, falling 30%+ from the previous month’s all-time highs. Since then markets have been on an absolute tear. The S&P 500 is up 91% from the March 2020 lows. The S&P/TSX 60 is up 70%.

That’s just country specific market indexes, mind you. Since March 2020 individual stocks like Facebook and Apple are up 137% and 155% respectively. Tesla is up 700%. Meme stock darlings AMC and GameStop are up 1,045% and 3,621% respectively.

No doubt, unless they’ve done something disastrous, new investors participating in this market have seen incredible returns so far.

This can lead to overconfidence – when people’s subjective confidence in their own ability is greater than their objective (actual) performance.

Overconfident Investors

Larry Swedroe says the biggest risk confronting most investors is staring at them in the mirror. This is the first type of overconfident investor.

Overconfidence causes investors to trade more. It helps reinforce a belief that any investment wins are due to skill while any failures are simply bad luck. According to Swedroe, individual investors tend to trade more after they experience high stock returns.

Overconfident investors also take on more uncompensated risk by holding fewer stock positions.

Furthermore, overconfident investors tend to rely on past performance to justify their holdings and expectations for future returns. But just because stocks have soared over the past 18 months doesn’t mean that performance will continue over the next 18 months.

In fact, you should adjust your expectations for future returns – especially for individual stocks that have increased by 100% or more. No stock, sector, region, or investing style stays in favour forever. If you tilt your portfolio to yesterday’s winners (US large cap growth stocks) there’s a good chance your portfolio will underperform over the next decade.

The second type of overconfident investor is one who makes active investing decisions based on a strong conviction about how future events will unfold.

Related: Changing Investment Strategies After A Market Crash

Think back to the start of the pandemic. As businesses shut down around the world it seemed obvious that global economies would suffer and fall quickly into a massive recession. The stock market crash reinforced that idea. Investors hate uncertainty, but this time it seemed a near certainty that stock markets would continue to fall and remain in a prolonged bear market.

Markets quickly turned around as central banks and governments doled out massive stimulus to keep their economies afloat and their citizens safe at home. Now it became ‘obvious’ that investing in sectors like groceries, cleaning supplies, online commerce, and video technology would produce strong results. Continue Reading…