The iShares S&P/TSX 60 Index ETF (TSX:XIU) has become Canada’s most popular ETF, with assets of more than $11 billion and average daily trading volume of more than 3.2 million shares. It has become the go-to way to gain access to a good sampling of Canada’s largest companies.
The ETF also has some other nice things going for it as well, including a 2.8% trailing yield, and a maximum management expense ratio of just 0.2%. That doesn’t make it the cheapest ETF in Canada, but it certainly makes it less expensive than average.
Because of these perks, many index investors have made XIU a major holding.
But there are some disadvantages investors should be aware of, including a huge weighting to financials, which comprise of nearly 40% of assets. Up next is energy, which is 21% of assets, and then basic materials, which is 11% of assets. In total, these three sectors make up more than 70% of the ETF’s total assets.
In other words, investors are buying outsized exposure to just three sectors, while being underweight just about everything else. For folks looking for that kind of exposure, this is a good thing. For those investors looking for a truly diverse portfolio, it isn’t.
To further illustrate this point, consider this. Out of the 60 stocks in the fund, there’s only one with any exposure to health-care. It makes up just 0.49% of assets.
Ultimately, the good outweighs the bad when it comes to XIU. Investors just have to keep in mind that perhaps there may be better choices out there, depending on their goals.
