Investment Q&A

We have nothing against covered call funds as long as investors understand them. 'Potentially' higher capital gains are given up in exchange for enhanced income. In a falling rate environment, the underlying stocks should do reasonably well. Shares may not move 'as much' as bonds, but rates do have a big influence on certain sectors (utiltiies, for one). Income will stay high, but the funds may experience more turnover (as options are assigned when they go above the strike price). In a less volatile environment, it is possible that options premiums decline, and this could lessen the impact of potential gains. But options premiums are very hard to forecast. And if things do get 'better' for equities call options premiums could even increase if investors become generally more bullish.