Passive Investors: 2 iShares ETFs to Set and Forget for the Next Decade

iShares S&P/TSX Capped Energy Index ETF (TSX:XEG) and another intriguing passive investment product are fit for new investors.

| More on:
exchange traded funds

Image source: Getty Images

Passive investors have a lot of ETFs (exchange-traded funds) to choose from on the TSX Index. Undoubtedly, as Canada follows in the footsteps of the U.S., which has a plethora of passive investing options, many beginner investors may be wondering which passive investment they should look to as more options pop up from across the board.

Indeed, passive investing was supposed to be simple, easy, and straightforward. However, with a growing number of “flavours” out there, it can be quite tricky to construct an ETF portfolio. The good news is that you don’t need to have the “perfect” mix of ETF and index funds to do well. In fact, all it takes is one well-diversified ETF — think iShares Core S&P 500 Index ETF (CAD-Hedged) (TSX:XSP) — to do the job.

The XSP: A hedged way to play the broad S&P 500

Now, I’m a huge fan of index funds, especially the lower-cost ones. They’re getting cheaper with time. And many of them exist on the TSX today. With varying assets under management (AUM), investors may wish to prefer the ones with the highest AUM for maximum liquidity.

In any case, I think XSP shares are among the best in class. Though it’s quite boring to bet on a run-of-the-mill S&P 500 index ETF, I still think it’s one of the wisest ways for new investors to start their investing journey.

Created with Highcharts 11.4.3iShares Core S&P 500 Index ETF (CAD-Hedged) PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

The XEG: An easier way to bet on the broader basket of energy plays

I’m not a massive fan of sector-based ETFs. However, when it comes to iShares S&P/TSX Capped Energy Index ETF (TSX:XEG), I have to say I’m quite intrigued. The Canadian market is full of great energy plays, but it can be quite tricky to keep up with every one of them, especially for the ones with smaller market caps.

At writing, XEG shares are flat (down around 4% over the past year) but could receive a bid higher in 2024 as energy plays return to the spotlight. Either way, it’s one of my favourite ways for “lazy” investors to bet on the energy scene.

Created with Highcharts 11.4.3iShares S&p/tsx Capped Energy Index ETF PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

The Foolish bottom line for passive investors

Passive investors should keep things simple and opt for low-cost ETF solutions to meet their long-term needs. Undoubtedly, index and sector-based funds are incredibly cheap, with a growing number of competitors now available on the Canadian market. As the number of options continues to surge, I expect management expense ratios) to fall, making it as affordable as ever for new investors to kick off their Tax-Free Savings Account or Registered Retirement Savings Plan portfolios.

While it’s always intriguing to start picking your own stocks, I believe that ETFs represent an amazing starting point for investors seeking to gain exposure as they learn about investing as a whole. Index ETFs such as the XSP are among the best starter kits for beginner investors who just don’t know where to start.

Whether you opt to “graduate” from such ETFs to stock-picking or stay within the realm of passive investing, I believe the impressive slate of ETF products sets today’s investors up very nicely for the long haul.

Should you invest $1,000 in Ishares S&p/tsx Capped Energy Index Etf right now?

Before you buy stock in Ishares S&p/tsx Capped Energy Index Etf, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Ishares S&p/tsx Capped Energy Index Etf wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

clock time
Bank Stocks

1 Magnificent Financial Stock Down 23% to Buy and Hold Forever

This top TSX financial stock is trading well below its recent peak, but its long-term fundamentals remain rock solid.

Read more »

dividend growth for passive income
Bank Stocks

This Canadian Bank Pays 4.75% and Could Double Your Money by 2030

A Canadian bank is a top pick for its lucrative dividend and potential to double your money in five years.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How I’d Invest $7,000 in My TFSA for $660 in Tax-Free Annual Income

Canadians looking for ways to make the most of the new TFSA contribution room should consider investing in these two…

Read more »

oil and natural gas
Energy Stocks

1 Magnificent Canadian Energy Stock Down 23% to Buy and Hold for Decades

This oil and gas producer has increased its dividend annually for more than two decades.

Read more »

Silhouette of bull in front of setting sun
Investing

Where I’d Invest $2,500 in the TSX Today

Given their solid underlying businesses and healthy growth prospects, I am bullish on these TSX stocks.

Read more »

path road success business
Dividend Stocks

How to Invest $50,000 of Tax-Free Cash as Canada-US Trade Uncertainty Escalates

Few Canadian stocks are as easy a choice as this one, making it perfect during volatile periods.

Read more »

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

This Dividend King Paying 7.5% in Monthly Income Is a Must-Have

This high-yield TSX stock might not be a textbook Dividend King, but its reliable monthly payouts and improving financials make…

Read more »

monthly desk calendar
Dividend Stocks

How I’d Generate $200 in Monthly Income With a $7,000 Investment

Want to establish $200 in monthly income (or even more?) Here's an easy way to start today that will provide…

Read more »