When it comes to building wealth for the long term, few investments offer the same combination of simplicity, diversification, and low cost as exchange-traded funds (ETFs). ETFs track the performance of market indexes, providing investors with an efficient and passive way to grow their portfolios. For investors looking to start with a modest sum of $2,000, iShares Core Equity ETF Portfolio (TSX:XEQT) is an excellent choice.
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Why choose XEQT?
XEQT is an attractive option for investors who want broad exposure to a diverse set of global equities and all-in-one, low-cost investments. The fund currently holds about $6.9 billion in assets under management, reflecting its popularity among both new and experienced investors. XEQT aims to replicate the performance of a global equity index, and it does so by investing in a blend of Canadian, U.S., and international stocks through strategic allocations in various ETFs. This diversification helps mitigate risk while giving investors the opportunity to benefit from the growth of global markets.
Diversified and low cost
One of the key reasons XEQT is an ideal choice for long-term investors is its diversification. By holding a wide variety of stocks from different regions and sectors, the ETF reduces the risk of concentrating investments in any one area. It includes top-tier companies across industries such as technology, healthcare, and consumer staples. This diversified approach not only balances risk but also maximizes the potential for growth as different sectors and regions perform at various times.
In addition to diversification, XEQT’s cost structure makes it especially appealing for long-term investors. With a management expense ratio (MER) of just 0.20%, it is significantly more affordable than many actively managed funds. Over time, keeping costs low is crucial for wealth building, as high management fees can eat into investment returns. By investing in XEQT, you retain more of your gains, which can compound over time for more substantial long-term growth.
Simplicity for long-term investors
Another reason investors invest in XEQT is its simplicity. For someone with $2,000 to invest, XEQT offers an easy entry point into the world of global equity investing. Unlike other funds that require constant monitoring and rebalancing, XEQT provides a one-stop solution. Investors can buy into XEQT and leave it to grow over time. It’s a fantastic option for those who want to stay hands-off with their investments or don’t have the time or expertise to manage a more complex portfolio.
Impressive performance and consistent growth
Performance history is always a key factor in investment decisions, and XEQT doesn’t disappoint. Over the past three years, the fund has delivered an impressive 11.6% annual return, far outpacing the 7.6% return of the Canadian stock market during the same period. While past performance is no guarantee of future results, this solid track record demonstrates XEQT’s ability to tap into the growth potential of global equities and provide consistent returns.
A long-term strategy: Dollar-cost averaging
While investing $2,000 in XEQT is a great start, the true power of long-term investing comes from consistent contributions. Consider adopting a dollar-cost averaging strategy — investing a fixed amount regularly — so your money works for you over time. This strategy helps you buy more shares when prices are lower and fewer shares when prices are higher, potentially reducing the impact of market volatility. Plus, when the market corrects (as it inevitably does), you’ll have the opportunity to purchase additional units at more attractive prices.
The Foolish investor takeaway
iShares Core Equity ETF Portfolio offers a robust, low-cost, and diversified investment solution for those looking to build wealth for the long term. Whether you’re just starting with $2,000 or looking for a core holding to complement your portfolio, XEQT’s global exposure, cost-effectiveness, and solid performance make it a good choice. With patience, consistency, and a long-term outlook, XEQT has the potential to help investors reach their financial goals, making it a top ETF to buy and hold forever.
