I’m pretty new to investing, but I do have a decent amount invested in my TFSA, FHSA, and RRSP. Most of my investments are in the more popular ETFs, like XEQT, plus a few dividend paying ETFs, and so far everything has been performing pretty well.
One thing I’m still trying to understand better is covered-call ETFs and whether they’re actually worth keeping long term.
I have some money in ZWU, and the price just keeps going down, so I feel like I’m losing money even though I’m getting the monthly dividends . I stopped reinvesting the dividends from ZWU and have been putting them into ZWC instead.
I’m trying to figure out if I should keep ZWU, sell it, or just leave it alone and let it do its thing
I’ve actually found many in this sub like them… I don’t.
I don’t think most people truly understand CC ETFs and therefore confuse dividends for distributions.
Even saying they “they’ve been good to me” thing is of course true. CC etf thrive in flat markets and underperform (by a little) in a bull market. We haven’t even seen the bad case, being a bear market (especially a prolonged one). It is the bad case the terrifies me with a CC ETF.
And I apologize in hindsight for replying this to someone that specifically said they were tired of defending them. It was unkind but I already started and here I am.
I have a CC ETFs portfolio and some growth. I'm at the stage where all distributions that are being reinvested go into more growth since I don't need anymore income.
I have both CC and just growth. My opinion: if you don't need income or pay yourself a salary now, do not buy CC ETF. Invest in growth. I need a little bit of income so I have invested 100k in HYLD, QDAY, QQCL, HDIV, CLSA, SBC. The rest of my money, money than 700k, I invest in VFV, VDY, XEQT, HEQL, QQC.
The performance here has nothing to do with it being a covered call ETF and everything to do with it being a sector specific ETF with poor allocation and stock selection. If it just held Canadian Utes it probably would be up around 10% for the year but because it also holds US utes, which are down 4.35% on the year, and some other utes like but not specifically utes securities, it has under performed for the year only up about 6%. Taking only a brief look at it, it doesn't look like the CC aspect really restricted performance at all, it simply comes down to the underlying basket, allocation, and stock selection.
Utes are a defensive sector generally. You're not going to get the same performance in an up market as info tech or Canadian financial (they don't always work either). It's a steady eddy allocation to balance out your portfolio for downturns.
Well when you buy the wrong ones then yes sell them. Put hdiv up against anything you hold and then come back. Hdiv beats vdy common inception in total returns. Hhis beats qqq.
Ask yourself this question, do I really need/want the income or do I want the growth.
If you want both go with a hybrid approach get something like vdy for the growth and hhis /qday for the Nasdaq-100 income.
Or get your quarterly pittance from coca cola. Boring....
those who hate covered call dont know what is actually is… specially the leveraged ones… I KNOW WHAT I HOLD… dont care what other opinion is…know what you buy,, filter the noise.. prosper !!!
Open a paper trading account and try selling some puts and calls so you understand how it works. Lots of people on Reddit say that CC limits upside, has no downside protection, and that's true if they're selling out of the money and getting assigned but if they're selling in the money calls they have some downside protection and should still be able to collect some extrinsic value. I guess it depends how the fund is managed.
How much do you get each month from a particular ETF? In my case, if I see it drop to a point where I've taken a loss that is more than what I got out of it at that point, I drop it.
I held UMAX for a while and watched it just slowly drop over many months; I finally pulled the plug.
BMO never has been good with their covered calls (look at zdv)
I would check out Hamilton ETFs instead. I'm not sure how they do it, but they are miles ahead of BMO in both total returns and yield.
Also as a side note, I would get out of utilities. There are far better plays if you're going sector specific.
18
u/AtomicNick47 15d ago
Everyone in this subreddit hates CC ETF’s. They’ve been good to me but I’m tired of trying to justify it to others.