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BMO Canadian High Dividend Covered Call ETF (ZWC $20.31)
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Hamilton Technology YIELD MAXIMIZER TM ETF (QMAX $23.47)
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Hamilton REITs YIELD MAXIMIZER TM ETF (RMAX $16.08)
Q: After holding this ETF for about 8 years and riding many waves up and down, I am finally ahead a little (not counting dividends). It makes up about 17% of my total holdings. I do not have any substantive exposure to Technology or Reits. There are two etf's I have my eye on-QMAX and RMAX which pay about 10%. ZWC pays about 6%. I would only switch about 50% of ZWC and split it out evenly to QMAX and RMAX. I already hold a bank ETF and a Utility ETF so I think doing his would give me some additional diversification. Your thoughts please?
As a side note, many people ask about these covered call ETF's. When I bought ZWC the TSX was around 16,000. Now I am just slightly above what I paid 8 years ago and the TSX is almost double. Don't expect big growth with these vehicles however the dividends are nice.
As a side note, many people ask about these covered call ETF's. When I bought ZWC the TSX was around 16,000. Now I am just slightly above what I paid 8 years ago and the TSX is almost double. Don't expect big growth with these vehicles however the dividends are nice.
5i Research Answer:
Yes, covered call ETFs tend to underperform the non-covered call versions due to the nature of the calls capping upside potential. They tend to work best as a supplement for an investor looking for income opposed to a core holding. For outsized yield, we would be ok with this change. As noted, it increases diversification into other areas but it does also increase risk a bit given the sector focus/concentration of QMAX and RMAX. The same dynamic you cited will still apply here though where these ETFs are likely to lag in capital gains compared to the non-covered call alternatives.