Investment Q&A

ZWC has a five year return of 12.62%; HBF 10.54%. HHL 9.13%. They are all doing what they intended to do, but in a market rally covered call funds will lag straight equity funds. If we look at CDZ, for example, vs ZWC, its five-year is 14.56%. The income is nice on CC funds but paying out return of capital (ROC) and constantly resetting options can result in lower returns. We have nothing against these funds, and the ROC component can set up some tax benefits, but for a long term investor who doesn't require additional income we think it is far better to own straight equity (no covered calls) funds. ZWU five year is 7.42%. Utilities could do better with interest rates moving lowert but it too is a covered call fund. ZUT is a suggested non-CC ETF for utilities.