# XIU is a Dog!! Better You Put Your Money in a Savings Account!!



## Belguy (May 24, 2010)

XIU is a dog--from the Globe and Mail.

:frown::upset::frown-new::grumpy:

http://www.theglobeandmail.com/glob...-for-canadian-index-investors/article4592614/

Another argument for a portfolio of dividend paying stocks.

Any thoughts? 

Do you own XIU and what do you plan to do with it? Will you sell it and move to another Canadian Equity ETF and, if so, which one?


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## gibor365 (Apr 1, 2011)

He has a point! When I just started investing about 1.5 year ago , I bought XIU (after reading some "coach potato's" blogs) and twice averaged down....and I'm very down with this one... Sorry I bought it, if instead I'd invest more into blue-chips I bought about the same time (telcos, financial, some US aristocrats), my total return would be much MUCH better....
Most likely I should've take a loss and sell , but still ....waiting and suffering


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## Jaberwock (Aug 22, 2012)

*Index investing*

XIU is an index fund based on the 60 biggest companies on the TSX. Some of those companies are better investments than others. If you are prepared spend a little time sorting out the good ones from the not so good you will have an excellent chance of beating the index by two or three percent. Also, if you add a few good smaller stocks that are not in the index, you can do even better.

XIU has performed poorly over the last couple of years because it is heavy on resource stocks, many of which are suffering because of the general doom and gloom in the economy. I keep a few in my account, just so that I have a record of the value, so I can track my own performance against the benchmark.

I have loaded up with dividend stocks and am easily beating the index, I will stay with that strategy until I see a definite improvement in the economic forecasts, which will likely not happen for another year or two.

You don't have to use index investing, you can put together a decent portfolio with adequate diversity if you have $50k+ to invest.


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## andrewf (Mar 1, 2010)

Belguy, stop reading the papers. At least the personal finance section.


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## humble_pie (Jun 7, 2009)

actually it's the first sensible thing the Dormouse has ever said.

all those horrid big equity etfs have performed scandalous over the past decade. Some like the international V-alphabet soups have lost money since inception. Yet the pundits babble on about re-balancing, as if that would cure anything.

shucks even the canada pension plan performed better than the wretched equity etfs.

it's clear now that indexing has been a giant conspiracy designed to benefit nigerian aliens. That's where the money went. Although bogle & som seif must have got their cuts first, before the $$ went extra-terrestrial.


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## Sampson (Apr 3, 2009)

Funny thing pie.

I was looking through some additional accounts of ours (I sure you recall the thread about this a few weeks ago), and the most generic indexing account (4 holdings, bond, CAD index, US index, EAFE index) has had the worst returns of all our accounts, calculated since May 0f 2009.

I think my stock picking was around 7-8% annualized from BEFORE the crash, but one the account with the most basic couch potato setup was returning only 3-5% since the bottom.

I think the rest of her indexing account gained only because of the sequence of returns and from the more advanced and less common approach of 'slicing and dicing'.


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## humble_pie (Jun 7, 2009)

yes, i'd imagine that any "quatre quarts" etf account - canadian, US, international ex-US, bond - kept fully invested at all times has underperformed your hand-picked stock portf w its good-looking 7-8% returns over the past 5 exceptionally rocky years. 

purely index fund accounts that outshine due to skilful in/out market timing, like your spouse's other etf accounts, draw my awe & admiration. This imho is so much harder to do than harvesting volatility by selling options !


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## gibor365 (Apr 1, 2011)

I think until recent , "famous" YLO used to be listed in TSX60 and when it got decimated, XIU got impacted.... it's not thousands stocks like in VTI.
The Canadian ETF that imho is not bad -> ZQQ


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## HaroldCrump (Jun 10, 2009)

gibor said:


> I think until recent , "famous" YLO used to be listed in TSX60 and when it got decimated, XIU got impacted


Also, isn't RIM part of the XIU as well?



> .... it's not thousands stocks like in VTI.


Have you looked at the 10 yr. (or SI) returns of VTI?
I believe it is trailing even short term bond returns, let alone long bonds.
Something like 3.50% or thereabouts.
The _thousands stocks_ is precisely what is dragging it down.
A dog if ever there was one....


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## CanadianCapitalist (Mar 31, 2009)

humble_pie said:


> all those horrid big equity etfs have performed scandalous over the past decade. Some like the international V-alphabet soups have lost money since inception. Yet the pundits babble on about re-balancing, as if that would cure anything.
> 
> shucks even the canada pension plan performed better than the wretched equity etfs.


Really?

10-year returns for the period ending March 2012:
CPP Pension plan: 6.2%
XIU: 6.94%

And the V-soup ETFs? (since inception. All in US dollars.):

US stocks: 3.80%
Developed ex. USA: -4.84%
Emerging Markets: 9.61%

I think the comparisons like the one made in the Globe article are meaningless. The columnist is attempting to compare 5-year returns of -0.40 with his portfolio of dividend paying stocks. Except that the only thing we know about his dividend stocks is:

"Meanwhile, most of my dividend stocks have posted double-digit gains."

Gee, thanks that was really illuminating.


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## andrewf (Mar 1, 2010)

Hence my advice to stop reading the personal finance section. The writing is just appallingly bad.


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## doctrine (Sep 30, 2011)

I personally would not recommend XIU in a indexed portfolio. It's only 60 stocks, and some choices even today remain questionable. (TA/RIM/POW), and the materials and energy are far far too overweight for any kind of reasonable diversification.


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## HaroldCrump (Jun 10, 2009)

CanadianCapitalist said:


> And the V-soup ETFs? (since inception. All in US dollars.):
> 
> US stocks: 3.80%
> Developed ex. USA: -4.84%
> Emerging Markets: 9.61%


Most of these V-soups have been around for at least 10 years, no?
So the SI returns are approx. 10 yrs., give or take.

If so, those are appalingly poor returns for someone that has kept their money invested into these for 10+ years.
These are not even beating 5 yr. laddered GIC returns, nor short term bond returns.

Only the EM fund returns _appear_ to be great, but the first 5 years of this 10 yr. period happens to be the most bullish period for these regions.
The last 4 years have been far less attractive.

That said, I do agree about the general quality of the personal finance articles.
Very mundane, and not worth the time to spend reading.
And I hear these clowns want us to pay for it soon....


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## andrewf (Mar 1, 2010)

You need to make a distinction between the fund and the asset class. These funds all did a pretty good job of tracking their index, so I would say the fund is good. The returns for the asset class may have been disappointing, but the last ten years have been a challenging time for equities.


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## Belguy (May 24, 2010)

I'll leave it to others to determine whether this is a meaningful comparison, but let's look at the Mawer Canadian Equity Fund and compare it's performance to that of the XIU. Note that the Mawer fund has a top 5-star rating by Morningstar and is the top performing Canadian equity fund over the past five years according to Canadian Moneysaver. As of September 30, it has posted a longer term 10 year return of +7.12% while the XIU returned +9.72%. Mawer Canadian Equity has a MER of 1.25%.

The conclusion that I draw from this is that even the best professional money managers cannot successfully beat the indexes over the longer terms.

And I further conclude that, if you are going to pick your own stocks, you have to be a better picker than most professional money managers and good luck with that!! You will perhaps need more luck than skill over the longer time periods while luck may serve you well over shorter periods of time.

Rebuttals welcome.

http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?id=17968

http://ca.ishares.com/product_info/fund/performance/XIU.htm

I am a simple man and so some may judge my conclusions to be too simplistic but perhaps you could explain to me where my thinking goes wrong.

I agree that one can stop reading the investment news and trying to outsmart the markets and just invest in the indexes in the first place and spend one's time on more interesting and productive pursuits.

So, here you have the professional money managers for the BEST performing Canadian equity fund unable to beat the index fund over the past ten years and, as a stock picker, you actually think that you can do better and beat the index fund over the long run? Again, I say good luck with that!!

Over the long term, you can't beat the markets but maybe you consider it good enough that you can have some fun trying. It might be more productive to just invest in the index and spend your spare time watching cartoons instead of beating your head against the wall trying to pick winning stocks and trying to successfully time the markets.

That said, don't necessarily expect superior shorter term results. After all, the five year return of XIU is -0.40%. However, the longer the term, the less likely you are to stock pick and market time and expect to come out ahead.


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## Argonaut (Dec 7, 2010)

Picture this. You're Christmas shopping, and looking through the latest 300 page catalogue. Instead of delving through and choosing yours and your families' favourite items, you decide you don't have time and just order the entire catalogue instead. Come Christmas:

"But mommy, I don't want a sterling silver napkin holder, I wanted an iPhone."
"Sorry son, if it's in the catalogue it must be good! Plus, the iPhone needed to split its packaging 10:1 before it could be included in the catalogue."

Critics will point to this as a strawman argument. To that I reply, it's October.. I need the strawman to keep the crows out of my pumpkin patch.


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## andrewf (Mar 1, 2010)

^ I could say that analogies are for stupid people. 

This one is not particularly apt. More like you pick ten things that you think you might really like, but despite all your effort, you like those ten items less than ten items picked at random.


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## GoldStone (Mar 6, 2011)

XIU is a picture-perfect ETF.

It boasts
- a razor thin MER
- a razor thin tracking error
- a razor thin bid/ask spread
- huge trading volumes

That's all you can ask of an ETF.

The criticism should be directed at the underlying index, S&P/TSX 60. It's very poorly diversified.

33% Financials
26% Energy
20% Materials

Once you add Industrials (6%) and Consumer Discretionary (4%), you end up with 90% in cyclical sectors. This index is not recession proof at all. No wonder it performed poorly in the last 5 years.


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## My Own Advisor (Sep 24, 2012)

Hold XIU and get your consumer stocks from the U.S. Nothing wrong with the S&P/TSX index returns over a decade or more. 10-year as of Sept. 30, 2012 = 9.8% and 20-year as of Sept. 30, 2012 = 9.2%.

http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?id=53057


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## humble_pie (Jun 7, 2009)

there is no 20-year in XIU as the etf only debuted in 1999. I've been a long holder since june 2011. My cost was 11.26, so the increase has been reasonable.

CC is right, the decade-long performance in XIU has been good. It's the seesaw-going-nowhere of the entire past 5 years that has disappointed long holders. CMF is a young message forum, so there are likely to be many here who've held only for a few tread-water years at most.

in my case total returns in XIU were enhanced by selling options. However, even for the entire past decade, XIU lags performance-wise behind my own accounts. I'm content with this because i bought XIU as a defensive holding, somewhat treasury-bond-like in its quality of being unlikely to ever go bankrupt, but paying far better.

my criticism of the V-vegetable soups in international etfs remains. I join with harold in noting their lacklustre returns over many years. I think many new investors are blindsided by misguided hype into believing that 25% US equity + 25% international equity are going to deliver sterling results.


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## GoldStone (Mar 6, 2011)

humble_pie said:


> there is no 20-year in XIU as the etf only debuted in 1999.


Yeah but, the underlying index returns are readily available. My Own Advisor posted the link to data. XIU tracks its index well.


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## Sampson (Apr 3, 2009)

humble_pie said:


> I think many new investors are blindsided by misguided hype into believing that 25% US equity + 25% international equity are going to deliver sterling results.


But that's not the purpose. I still believe _most_ investors can and would benefit from indexing. I don't disagree that with some effort and knowledge, it could be possible, and maybe, maybe even more likely you can post greater returns then a general indexing strategy. However, many investors are neither inclined to learn, nor even begin to try. I am guessing this is the majority of people, even looking around in my own circle or friends and relatives, they would do much better indexing that following 'tips', buying pseudo-indexing tracking Canadian Equity funds, or not investing at all.


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## PharmD (Dec 21, 2011)

Belguy,

You looked at the wrong number on the Mawer Canadian Equity fund. It's ten year return was actually 9.81%. The number you quoted was the group average. It only slightly outperformed XIU, but after commissions it would look even better and has lower beta to boot.


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## CanadianCapitalist (Mar 31, 2009)

HaroldCrump said:


> Most of these V-soups have been around for at least 10 years, no?


No. Only VTI (US stock) has been around for 10+ years (Inception 2001). VEA (Developed Markets ex. USA) inception is 2007. VWO (emerging markets) inception is 2005.

10-year returns (in USD):
US Markets - 8.76%
Developed ex. NA - 8.20%
Emerging markets - 17.0%

Stock market returns can be shown to be poor (or good) if you carefully pick the start and end dates. The 10-year returns above are satisfactory only because the start period is the bear market of 2001-02. But the fact remains that most 10-year rolling periods have returns that beat bonds. It's just that in the late 2000s, 10-year returns were quite poor due to extraordinarily high returns in the 1995-99 period when the S&P went up an annualized 26%. 

It is extremely dangerous to invest based on recent history.


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## Sampson (Apr 3, 2009)

CanadianCapitalist said:


> Stock market returns can be shown to be poor (or good) if you carefully pick the start and end dates.


I know you and I often try to emphasize this point. What is curious is that a rolling average (weighted or not) has not been developed and systematically adopted to compare different assets. It is always point A to point B, as if anyone invests all their money upfront anyway.


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## CanadianCapitalist (Mar 31, 2009)

Sampson said:


> I know you and I often try to emphasize this point. What is curious is that a rolling average (weighted or not) has not been developed and systematically adopted to compare different assets. It is always point A to point B, as if anyone invests all their money upfront anyway.


I agree. One of the best sources for rolling returns information is the Dimensional Matrix Book. It includes all kinds of data that will be interesting to investors (large-cap, small-cap, value, growth, blend and my favourite, real returns). Here's the 2010 version:

http://www.tma-invest.com/files/inv..._concepts/Dimensional_CA_Matrix_Book_2010.pdf


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## Belguy (May 24, 2010)

I understand (sort of) all of the above but, for me, it is disappointing to look at the S&P/TSX Index and see that it has returned -0.25% over the past FIVE YEARS!!! ending September 30. Perhaps, if you are young and have a long time horizon, it isn't so serious but I am approaching 70 and the fact that I have not been able to grow my portfolio in any meaningful way has a huge impact on my quality of life in retirement.

Can we look forward to five more years of no net growth in this index? Nobody knows but the prospect is even more discouraging.

Here we go again!!

http://www.theglobeandmail.com/glob...orst-week-since-start-of-june/article4609835/

I have been accused of being too negative a lot of the time but I am just as frustrated with all of those who keep trying to put a positive spin on quite a negative situation.

It's tantamount to trying to put lipstick on a pig and, over the past five years, the markets have not exactly been a great place to invest one's money.

In some cases, cash under the mattress would have done just as well.

Invest now and hope that things are better over the next five years. You pays your money and you takes your chances.

Maybe the next generation of retirees will have better luck and timing. For we senior seniors, time is running out.


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