Q: It looks like, regardless of oil price movements or direction of the market, XEG only goes down. I am currently down 15% on XEG and wondering if there is any hope for oil sector in Canada? Would you keep this ETF/sector for 1-3 years timeframe, or get rid of oil sector entirely and relocate money to some other sectors?
5i Research Answer:
The sector has been weak but we think some exposure is still warranted for diversification purposes. The ETF has a five year annualized return of 12.75%, and three-years is 38.54%. To get these returns investors do need to put up with some volatility. The TSX has a 17% sector weighting. We think that is too high for most investors, but we think there is still some potential for XEG for longer term holders. The fund does pay a dividend (indicated yield 2.93%) while awaiting a recovery.