XGRO ETF Review 2023: iShares Core Growth ETF

If you’ve above-average risk tolerance and are looking for long-term capital growth, XGRO ETF is a great addition to your portfolio.

Not only can a growth ETF provide you with higher capital returns, but it can also provide you with regular dividends.

However, considering the risk that comes with investing in growth ETFs, you don’t want to just invest in any ETF. 

Even though XGRO is popularly ranked among the best all-in-one ETFs in Canada, you need to weigh its pros and cons before investing.

In this XGRO review, I cover all you need to know about the ETF to make an informed decision. This includes the allocation, holdings, fees, returns, and comparison of the ETF.

Photo credit: Blackrock

What is XGRO?

XGRO is the growth ETF rendering of iShares that’s offered and managed by BlackRock Canada.

The ETF was launched on June 21, 2007, and it’s traded on the Toronto Stock Exchange with the name “iShares Core Growth ETF Portfolio” and the ticker “XGRO”. 

As the name implies, XGRO seeks to provide long-term capital growth with a multi-asset allocation. The target allocation is 80% equity and 20% fixed income.

From its inception to March 31, 2023, XGRO has provided a 3.96% average annual return which is relatively lower than the since-inception-return of similar portfolios.

In addition, the last dividend yield distribution of XGRO in March 2023 was far below the distribution of similar portfolios.

So is it worth investing in XGRO? We can’t say yet. Keep reading to have a better understanding of XGRO and how it compares.

XGRO ETF Objective 

As with other growth ETF portfolios, the objective of XGRO is to offer long-term capital growth to investors.

The strategy the ETF employs to achieve its objective is common with those of similar portfolios. That’s, the ETF uses a mix-asset strategy with a target of 80% allocation on equity and 20% fixed income.

This target allocation informs the risk level and earning potential of the ETF. With high equity allocation, you should expect more volatility. In exchange, this can yield higher returns.

The 20% fixed income target allocation will help reduce the portfolio risk. To further reduce risk, the portfolio manager (BlackRock) often invests in cash and or derivatives (although at a negligible rate).

XGRO ETF Assets Allocation 

As noted earlier, XGRO targets 80% allocation on equity and 20% on fixed income. Below is the actual allocation of the ETF as of April 21, 2023: 

• 80.51% equity 
• 19.24% fixed income 
• 0.25% cash/derivatives

Compared with its target allocation, we can see that XGRO currently invests higher than its target allocation on equity and lower on fixed income. The ETF also invests 0.25% on cash/derivatives.

Irrespective of the 0.25% allocation on cash/derivatives, the ETF poses more risk considering the higher equity allocation.

That being said, below are the underlying holdings that the ETF allocates all its funds to as of April 21, 2023.

XGRO ETF Holdings 

As of April 21, 2023, XGRO has 20678 underlying holdings. This exposes the greater diversification that comes with the ETF.

However, below are the top 10 aggregate underlying holdings as of April 21, 2023:

XGRO Performance  

With higher equity allocation, you should expect a higher return with XGRO. But that’s not always the case. 

The following table shows the average annual returns of XGRO from inception to March 31, 2023.

Compared to the returns of similar portfolios, it’s obvious that XGRO has some of the lowest returns despite having a higher equity allocation.

The notable thing is that XGRO has been providing returns to investors for more than 1 and a half decades. Not many ETFs have this record yet.

XGRO ETF Dividends 

As a dividend-paying ETF, XGRO distributes dividends quarterly to investors. 

The last dividend distribution of XGRO was $0.10 per share as of March 16, 2023. This translated to a 1.62% dividend.

Compared to the last dividend distribution of similar portfolios, XGRO also has one of the lowest distributions.

XGRO ETF Fees 

There are two fees associated with XGRO — a management fee and a management expense ratio (MER). 

The management fee is 0.18% and the management expense ratio stands at 0.20%. With this schedule, XGRO is relatively cheaper than similar growth ETFs.

Even if you compare XGRO fees with mutual funds of robo-advisors, you will realize that XGRO has a low fee schedule.

Although the exact fees you pay depend on the method you used to invest in the ETF. More on this below.

Pros and Cons of XGRO

We can summarize what XGRO entails into the following pros and cons. 

Pros

• Low fees: As noted earlier, XGRO’s management fee and MER compete favorably against the fees of similar growth ETFs, mutual funds, and robo-advisors.
• Greater diversification: With 20678 underlying holdings (as of April 21, 2023), you can be assured of a low-cost global diversification with XGRO.
• Long-standing: With more than 1 and half decades of existence, XGRO stood the test of time more than several other growth ETFs.
• Eligibility: XGRO provides you access to  registered plans, SWP, DRIP, and PACC 

Cons 

• Lower returns: XGRO provides some of the lowest average annual returns compared to similar growth ETFs. 
• Low dividend yield: The dividend distribution of XGRO is also lower than the distribution of several growth ETFs.

How to Buy XGRO ETF

Before you buy XGRO, I suggest you first learn how it compares with other growth ETFs. I have provided a side-by-side comparison in the subsequent section.

If after reading the comparison you decide to go for XGRO, you have two options for investing in the ETF.

• Do-It-Yourself (DIY): This means investing the ETF yourself using a brokerage like Qtrade, Wealthsimple Trade, or Questrade. With this method, you’re 100% in charge of your investment decision, execution, and management. As such, you need to have sufficient investing knowledge to DIY to avoid costly errors. The advantage of DIY investing is that you will save on management fees and take full control of your portfolio. But what if you can’t DIY? The next affordable option is a robo-advisor.
• Robo-advisor: A robo-advisor is an automated investment platform that handles investments on behalf of individuals based on their risk tolerances, investment objectives, and personal situations. With a robo-advisor, you’re exempted from the entire investing process — saving you time and costly errors. The drawback is, you will be charged a management fee that could be as higher or lower depending on the investment strategy (active vs passive). Some of the best robo-advisors in Canada include Questwealth Portfolios, Wealthsimple Invest, and Virtualwealth.

How XGRO Compares

While XGRO is one of the oldest growth ETFs in Canada, there are younger options to consider. 

In this section, we’re going to see how XGRO compares with VGRO and ZGRO which are also ranked among the best all-in-one ETFs.

XGRO vs VGRO vs ZGRO 

Below is a table showing how the three ETFs compare based on their key characteristics as of March 31, 2023.

The three ETFs have the same investment objective and they seek to achieve it by investing in equity and fixed income security.

From the above table, we can see that ZGRO and XGRO have more allocation on equities. Little wonder ZGRO had the highest return since inception followed by VGRO.

In addition, ZGRO has the highest dividend yield in the last distribution followed by VGRO. 

The obvious interpretation is that XGRO’s higher equity allocation doesn’t translate to impressive returns as compared to ZGRO’s allocation.

But to get a clear picture of XGRO’s potential, it’s important to compare its current returns vs its past returns rather than with other ETFs.

That being said, XGRO is over 10 years older than VGRO and ZGRO. This provides a little more confidence knowing that the ETF has survived different market conditions.