When stock markets go on a wild rollercoaster ride, keeping your cool is easier said than done. While stocks and pure equity exchange traded funds (ETFs) can offer roaring growth, the occasionally sharp drawdowns along the way can test even the most resilient investor. If you are looking to smooth out the ride without parking your cash entirely on the sidelines, the iShares Diversified Monthly Income ETF (TSX:XTR) is a magnificent monthly-dividend fund built for relative safety.
Managed by BlackRock, the world’s largest asset manager, overseeing more than US$15.3 trillion, the XTR ETF combines the safety of fixed income with the capital growth potential of dividend-paying stocks, while geographically diversifying your investment across two great economies in North America: Canada and the United States.
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A Canadian ETF with a built-in defence system
The iShares Diversified Monthly Income ETF deservedly carries a low-to-medium risk rating, making it a sensible core holding for conservative investors or anyone looking to dampen capital volatility in their portfolio.
Rather than picking individual assets manually, the XTR ETF splits its $380 million multi-asset portfolio across several ETF holdings to form a balanced mix of 50.9% fixed income and 49.1% equities.
The fund takes a “fund-of-funds” approach, investing in an impressive 10,167 underlying securities through 12 direct iShares ETFs. This gives Canadian investors instant geographic and asset-class diversification, allocating 62.2% of assets into Canada and 35.7% into the U.S. economy.
Its top three underlying ETF holdings do the heavy lifting for both growth and stability.
- The iShares U.S. High Dividend Equity Index ETF (18% weighting) provides exposure to high-yielding U.S. dividend stocks for passive income and international growth.
- The iShares Core Canadian Short Term Corporate Bonds Index ETF (13.8% weighting) contributes predictable income with low risk of capital losses.
- The iShares MSCI Minimum Volatility Canada Index ETF (12% weighting) softens capital losses during market downswings while capturing upside during bull runs.
Rounding out the portfolio are nine other ETF holdings that add high-yield corporate bonds, Canadian government and provincial bonds, and dividend stocks to boost overall portfolio cash flow.
Historical safety during markets dowturns
The true test of a safe-haven ETF is how it behaves during market panics. When the 2020 pandemic crash hit, the all-equity iShares S&P/TSX Capped Composite Index ETF (TSX:XIC) suffered a stomach-churning maximum drawdown of 33.9%. By comparison, the XTR held up far better, experiencing a maximum drawdown of 23.9%.
That relative safety is a consistent trend. Over the past three years, XTR’s maximum drawdown was capped at 5.7%, whereas the XIC suffered a larger 11.6% drop from prior highs. Having that cushion helps calm nervous investors when market jitters take hold.
The XTR ETF combines monthly income with steady asset growth
Safety doesn’t mean entirely sacrificing equity returns. The XTR pays a reliable monthly dividend payout of $0.04 per share, yielding roughly 3.9% annually. It is fully eligible for registered retirement accounts, and setting up a Dividend Reinvestment Plan (DRIP) allows long-term investors to compound payouts automatically.
Despite its high fixed-income allocation, the ETF hasn’t given up its ability to steadily grow assets over time. Over the past decade, total annual returns have been respectable, delivering double-digit total gains in four of those years and posting negative total returns in only two.
XTR ETF Historical Total Returns (2016-Ytd 2026)
| Year | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | YTD2026 |
| Total Return | 13% | 6.5% | -3.6% | 12.% | 2.6% | 10.34% | -4.8% | 5.1% | 12.6% | 8.6% | 9% |
To be transparent, there is a trade-off: fixed-income protection creates a drag during fiery bull markets. Over the past 10 years, a pure-equity XIC surged 225.7%, while the XTR delivered a more modest 78% total gain, dividends included.
Foolish bottom line
With a reasonable management expense ratio (MER) of 0.6% – costing about $6 per year for every $1,000 invested – the XTR ETF offers professional multi-asset management in one simple package. If you want consistent monthly passive income, reduced downside risk, and peace of mind during market storms, this ETF is an outstanding option for relative safety.
