# XTR Are there any Good Reasons For Holding It?



## dogleg (Feb 5, 2010)

I am discouraged about my ownership of this stock. There must be better alternatives. Any suggestions?


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## james4beach (Nov 15, 2012)

There are legitimate reasons to hold this funds-of-funds ETFs. It's not a horrible ETF. My problem with it has always been that it's misleading. So I'd go through this checklist. If you answer Yes to all of them, it's an OK holding for you.

1. *Do you want the high distribution it's paying?* If you don't want the cash distribution (e.g. if you are DRIP'ing) there is absolutely no reason to hold XTR. Beware that DRIP'ing gives you the illusion of compounding the distribution yield... but it doesn't work like that.

2. *Are you OK that it's distributing more than its income?* This is unsustainable and depletes the capital of the fund over time -- *inevitably*. Though it pays a 6.66% distribution, the fund only earns income of around 3.5%. The rest of it requires capital appreciation, or pays out return of capital.

3. *Are you OK with its high risk exposure?* Although it's marketed as an income fund, it actually has significant risk exposure. Compared to other income funds, it holds a ton of junk bonds. And since junk bonds act very similarly to equities, the effective equity exposure is approx 88% equities. If you're OK with 88% equity risk exposure, then XTR is fine.


If you are comfortable with the risk exposure, and you understand that it pays out more income than it earns and you want to extract cash in that way from your investments, then XTR is not bad for that task.


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## gibor365 (Apr 1, 2011)

dogleg said:


> I am discouraged about my ownership of this stock. There must be better alternatives. Any suggestions?


DFN.PR.A


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## james4beach (Nov 15, 2012)

dogleg I may have misunderstood your original question. When you say discouraged, is it because the performance is poor?

As I showed in point #3, it's nearly a pure equity fund. If the stock market goes down, you should expect XTR to decline as well ... no mystery here.

For example, ZCN (TSX Composite Index ETF) declined -11% from its peak in early 2015 as a total return.
In comparison, XTR declined, as a total return, -8% from that peak.

That's more or less what you'd expect given my point #3 about the 88% equity risk exposure. For example if stocks fall -50%, you'd get a total return in XTR of approx -45%

If you want more price stability, then you need more fixed income. Perhaps a balanced fund of some kind. Many of the Monthly Income funds are actually balance funds, for example RBC Monthly Income. Because they have far less equity-like exposure than XTR, their price movements will be more muted.


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## james4beach (Nov 15, 2012)

Maybe the first questions, dogleg:

What has made you discouraged or unsatisfied with XTR ?

What are you seeking from this investment? e.g. stock exposure? fixed income? low risk income?


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## dogleg (Feb 5, 2010)

J4B: You raise good points. I think my main concern with this fund is -as you said- its long-term unsustainability. And of course its likely loss in 'share value' as time goes by. Anyway, maybe I am over reacting to a down market funk. Thanks to all.


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## james4beach (Nov 15, 2012)

> As I showed in point #3, it's nearly a pure equity fund. If the stock market goes down, you should expect XTR to decline as well ... no mystery here.


Notice XTR falling sharply along with stocks. It's now down to multi-year lows. If the bear market in stocks continues, it will go even lower.


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## Chica (Jan 19, 2016)

2 years later does anyone have opinions on XTR? It still seems to be around the same price. One of its holdings is XEI and I already hold 500 shares. My goal is income, this is .05¢/share, but I'd also like to see some growth. Looking to hold for 5+ years.


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## andrewf (Mar 1, 2010)

XTR woefully underperformed the market. If you want income, buy equities and sell a portion each year.


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## james4beach (Nov 15, 2012)

You could do better either by using simpler ETFs, or even by buying a mutual fund. As andrewf says, don't get caught up on the income thing. You can sell units of any fund to produce income. What's more important is the overall, total return.

XTR is more or less a Canada-focused "balanced fund". Assuming that you want to stay with the same kind of thing, here are some alternatives with very similar underlying holdings. For each, I've given the 5 year annualized performance to December 15. This figure includes all income and distributions, so it's "apples to apples".

BMO Monthly Income fund: 7.1%
*60% XIU and 40% XBB: 6.8%* ... this would be my choice
RBC Monthly Income fund: 5.9%
iShares XTR: 4.4%

XTR is the worst performing of the bunch.

Even if you just switched to XIU and XBB (two ETFs), you already would beat XTR by quite a bit. Or if you prefer mutual funds, the ones above are good alternatives. All of these things have approximately the same asset class and geographic exposure, and the same level of risk of loss.

I get angry at creations like XTR because this thing is designed to cloud people's judgement and attract their investment dollars with its high income distributions. It's one thing if the fund is run well, but this one isn't: it has poor holdings and is poorly managed. You get an investment that really isn't that different than just holding XIU & XBB, and yet, but somehow it performs _2% per year worse!_


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## Chica (Jan 19, 2016)

Hi. Thanks for your answers. Appreciate the responses, I guess I'll skip on XTR. I've also been looking at VCN, but I'll check out XIU and XBB split too. I have about $30,000 I want to put into another ETF, planning to move the money over to Questrade this week so I'd like to make a decision somewhat soon so the money starts working for me and then just leave it alone. I have enough mutual funds. Around $140,000 so I think I'm good there. Trying to get my ETFs to close in on that amount. I really appreciate the encouragement I get from everyone here.


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