XGRO vs XEQT
XEQT vs. XGRO: Which ETF is Right for You?
Investing in exchange-traded funds (ETFs) is a popular way to diversify a portfolio and manage risk while aiming for long-term growth. Among the many ETFs available, XEQT and XGRO—both offered by iShares—have emerged as strong contenders for Canadian investors seeking global equity exposure.
But which one is right for your investment goals? In this article, we’ll compare XEQT and XGRO, analyzing their key features, similarities, and differences to help you make an informed decision.
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What Are XEQT and XGRO?
Before we dive into the comparison, let’s quickly define what XEQT and XGRO are.
XEQT: iShares Core Equity ETF Portfolio
XEQT is an all-equity ETF, meaning it holds a portfolio entirely made up of global stocks (equities). Launched by BlackRock Canada in 2019, XEQT offers exposure to a diversified basket of stocks from Canada, the U.S., developed markets outside North America, and emerging markets. It’s designed for investors with a higher risk tolerance who are seeking long-term growth through stock market investments.
XGRO: iShares Core Growth ETF Portfolio
XGRO is a growth-focused ETF that holds a mix of equities (80%) and bonds (20%). This combination makes it slightly less risky than an all-equity portfolio like XEQT, while still offering growth potential. XGRO is suited for investors who want exposure to global equities but prefer to have some cushion from bonds to reduce overall portfolio volatility.
XEQT vs. XGRO: Key Comparisons
To help you understand the differences and similarities between XEQT and XGRO, let’s break down the comparison based on several key factors:
1. Equity Exposure
- XEQT: Offers 100% equity exposure, meaning it’s entirely invested in stocks. This makes XEQT a more aggressive option, with a higher potential for returns but also higher risk, especially during market downturns.
- XGRO: Offers 80% equity exposure and 20% bond exposure, providing some downside protection through bonds. The bond allocation helps cushion losses during market volatility but may limit returns compared to an all-equity portfolio.
Verdict: If you are looking for maximum growth potential and are comfortable with higher risk, XEQT is the better choice. For investors who prefer some balance and a bit more safety, XGRO is the way to go.
2. Management Expense Ratio (MER)
- XEQT: Has a low MER of 0.20%, making it a cost-effective option for long-term investors.
- XGRO: Has a slightly lower MER at 0.18%. While the difference may seem minimal, it can add up over time, especially if you’re investing large amounts.
Verdict: Both XEQT and XGRO have low fees, but XGRO has a slight edge when it comes to cost.
3. Risk Level
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XEQT: As a 100% equity ETF, XEQT is considered a high-risk investment. It’s designed for long-term investors who are willing to tolerate short-term market volatility for the potential of higher returns over time.
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XGRO: With its 80/20 mix of equities and bonds, XGRO carries a moderate to high risk. The bond component reduces risk slightly, making XGRO less volatile than XEQT.
Verdict: If you have a lower risk tolerance but still want strong growth potential, XGRO offers a more balanced risk-reward ratio compared to XEQT.
4. Diversification
Both XEQT and XGRO provide global diversification, but there are some differences:
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XEQT: Is composed entirely of equities, giving you exposure to thousands of companies across Canada, the U.S., Europe, Asia, and emerging markets. This broad diversification helps reduce the risk associated with investing in any single country or region.
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XGRO: Offers similar equity exposure but with a bond component that includes Canadian government and corporate bonds. This adds an extra layer of diversification by spreading risk across both asset classes—equities and fixed income.
Verdict: XEQT offers better diversification for those looking to stick solely to equities. XGRO provides more balanced diversification across both stocks and bonds.
5. Investment Objective
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XEQT: Suited for growth-focused investors who are comfortable with volatility and are seeking maximum returns over a long-term investment horizon. If you’re aiming to build wealth over several years or decades and can handle short-term fluctuations, XEQT could be a great choice.
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XGRO: Geared towards growth-oriented investors who still want some downside protection. If you prefer a slightly less aggressive approach while still focusing on growth, XGRO’s inclusion of bonds can offer some peace of mind.
Verdict: Choose XEQT if you’re looking for maximum growth potential with higher risk, and XGRO if you want growth but with some protection from market downturns.
6. Rebalancing
Both XEQT and XGRO are part of BlackRock’s all-in-one ETF portfolios, which means they are automatically rebalanced by the fund manager. This ensures that the portfolio stays aligned with its target asset allocation, without requiring manual intervention.
Verdict: There’s no difference here—both XEQT and XGRO offer automatic rebalancing for a hands-off investment experience.
Which ETF Should You Choose: XEQT or XGRO?
The decision between XEQT and XGRO ultimately depends on your investment goals, risk tolerance, and time horizon.
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Choose XEQT if:
- You have a higher risk tolerance and are seeking maximum long-term growth.
- You are comfortable with short-term volatility and don’t need the stabilizing effects of bonds.
- You have a long investment horizon (10+ years) and are focused solely on equities.
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Choose XGRO if:
- You want growth potential but prefer some downside protection with bond exposure.
- You are looking for a slightly less aggressive portfolio with a moderate risk profile.
- You want to invest in a portfolio that balances growth and some stability through bonds.
Conclusion
Both XEQT and XGRO are excellent ETF options for Canadian investors looking for global exposure and long-term growth. XEQT is ideal for those who want to be fully invested in equities and are willing to ride out the ups and downs of the market. On the other hand, XGRO provides a more balanced approach, making it a good choice for those who want growth with some level of risk mitigation through bonds.
Before investing, it’s essential to evaluate your personal financial goals and risk tolerance. You may also want to consult with a financial advisor to ensure your investment strategy aligns with your objectives.
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