In this post, we will discuss a popular ETF: XIT iShares S&P/TSX Capped Information Technology Index, offered by Blackrock. XIT is an exchange-traded fund that focuses on the Canadian tech sector. We will review: investment objective, MER and Holdings. we will finally try to answer the question if XIT is the right fund for you.
Many investors are interested in the tech sector, but unless you are tech-savvy, it’s tough to understand the industry and pick your stocks. A safer way is to invest in a technology-focused exchange-traded fund. By doing this, you will:
- reduce your overall risk,
- save on fees as ETFs are an excellent substitute for mutual funds, which usually carry higher fees,
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XIT Investment objective
XIT seeks long-term capital growth by replicating the performance of the S&P/TSX Capped Information Technology Index, net of expenses. The index tracked includes exclusively Canadian companies. In total, this ETF invest in 24 Canadian technology stocks. There is a 25% cap put in place to avoid over exposure to a particular stock.
XIT MER and Asset under management
The management expense ratio for XIT is 0.61%. This is the total of all fees including management fees and administration fees.
XIT ETF asset under management:
| Symbol | AUM in M |
| XIT | 643 |
XIT Dividends
XIT is an ETF focused on capital growth. The dividend yield is 0.02%. It’s not ideal for investors looking to build a dividend portfolio.
Historical performance
Updated daily
Thanks to Shopify, XIT had a great run in the past years. However, since the beginning of the year, the tech sector was hit hard by recent market volatility.
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XIT ETF Holdings
| Name | Weight % |
|---|---|
| SHOPIFY SUBORDINATE VOTING INC CLA | 25.34 |
| CONSTELLATION SOFTWARE | 21.54 |
| CGI INC | 12.32 |
| OPEN TEXT CORP | 8.57 |
| LIGHTSPEED COMMERCE INC | 7.72 |
| NUVEI SUBORDINATE VOTING CORP | 4.54 |
| DESCARTES SYSTEMS GR INC | 4.37 |
| BLACKBERRY LTD | 3.73 |
| KINAXIS INC | 2.69 |
| TELUS INTERNATIONAL CDA SUBORDINAT | 1.45 |
As you can see above, Shopify and Constellation software make up to 50% of XIT. Even with the cap in place, the fund does not offer true diversification.
XIT Sector allocation
| Sector | Weight % |
|---|---|
| Application Software | 49.09 |
| Internet Services & Infrastructure | 25.34 |
| IT Consulting & Other Services | 13.60 |
| Data Processing & Outsourced Services | 6.01 |
| Systems Software | 4.39 |
| Communications Equip. | 0.81 |
| Electronic Manufacturing Sces | 0.71 |
| Cash and/or Derivatives | 0.03 |
Conclusion
Choosing if XIT is the right ETF for you comes to answering the questions below:
Am I looking for an ETF that invests exclusively in Canadian tech stocks?
If the answer is Yes, then XIT is a good fit for your portfolio. If you are open to investing in US companies, then other options are available. I would recommend particularly ETFs that track the Nasdaq 100. These ETFs offer better diversification and include some household names in the tech industry.
If you are looking for an ETF that invests in various sectors, then I would recommend a global index ETF or an all in one ETF. See below some suggestions:
Are you comfortable with the medium to a high level of volatility?
Tech stock offers significant growth opportunities but also carries some risk and inherent fluctuations. In all cases, your portfolio should be diversified across various sectors. Putting all your money in the tech industry is risky.
Are you a big fan of Shopify and Constellation software?
Shopify and constellation software make up to 50% of XIT’s fund. So, buying XIT is in a sense investing mainly in these two stocks.