English – Page 17

The concept of the metaverse, a collective virtual shared space created by the convergence of virtually enhanced physical reality and persistent virtual spaces, is no longer a sci-fi fantasy. It’s rapidly becoming a digital reality with significant investment implications. This post delves into the burgeoning world of Metaverse Exchange-Traded Funds (ETFs), offering investors a gateway to this revolutionary space.

Understanding the Metaverse and Its Investment Appeal

Before diving into the specifics of Metaverse ETFs, it’s crucial to grasp what the metaverse is and why it’s garnering so much attention. The metaverse is an expansive network of 3D virtual worlds focused on social connection, gaming, virtual commerce, and more. It’s built on technologies like virtual reality (VR), augmented reality (AR), artificial intelligence (AI), and blockchain.

The investment allure of the metaverse lies in its vast potential to revolutionize how we interact, work, play, and transact. It’s not just a new platform for existing tech companies; it’s a breeding ground for emerging technologies and innovative startups.

Metaverse ETFs: An Investment Vehicle for the Future

ETFs are popular for good reasons: they offer diversification, lower risk compared to individual stock investments, and simplicity. Metaverse ETFs are specialized ETFs that focus on companies developing or significantly involved in the metaverse. These ETFs allow investors to tap into this high-growth potential sector without having to pick individual stocks.

Exploring Popular Metaverse ETFs

Let’s take a closer look at some of the most prominent Metaverse ETFs available to investors:

1. Fount Metaverse ETF (MTVR)

Expense Ratio: 0.7%

MTVR tracks an index of companies engaged in the metaverse industry, offering exposure to sectors like gaming, social media, and VR. Its diversified portfolio includes major companies pioneering in these areas, making it a compelling choice for investors seeking broad exposure to the metaverse sector.

2. Roundhill Ball Metaverse ETF (METV)

Expense Ratio: 0.59%

Focusing on global companies actively involved in the metaverse, METV is an excellent option for those looking to invest in VR, AR, digital assets, and related hardware and software. It includes a mix of tech giants and smaller, specialized firms, offering a balanced view of the metaverse landscape.

3. Global X Metaverse ETF (VR)

Expense Ratio: 0.5%

With the lowest expense ratio among the discussed ETFs, VR aims to invest in companies poised to benefit from the metaverse’s growth. It provides broad exposure to companies across various global regions, encompassing hardware manufacturers, content creators, and platform developers.

4. First Trust Indxx Metaverse ETF (ARVR)

Expense Ratio: 0.7%

ARVR seeks to replicate the Indxx Metaverse Index performance, focusing on key players in the metaverse’s development. This ETF is suitable for investors who prefer a mix of large and mid-cap companies involved in relevant technologies like AR, VR, and digital gaming.

5. ProShares Metaverse ETF (VERS)

Expense Ratio: 0.58%

VERS is designed to track the Solactive Metaverse Theme Index. It targets companies that stand to benefit from the metaverse’s expansion, focusing on sectors like technology, communication, and consumer discretionary. This ETF is ideal for those looking for exposure to a mix of established and emerging metaverse players.

6. Wedbush ETFMG Video Game Tech ETF (GAMR)

Expense Ratio: 0.75%

While GAMR isn’t exclusively focused on the metaverse, it invests in the video game technology industry, closely linked to metaverse technologies. Its holdings include major game developers and companies involved in relevant hardware and software, making it an attractive option for those interested in the gaming aspect of the metaverse.

Comparative Analysis: Risk, Return, and Sector Exposure

When comparing these ETFs, investors should consider factors like historical performance, sector exposure, and risk. For instance, MTVR and METV provide a broader exposure to the metaverse ecosystem, potentially offering more stability. In contrast, GAMR, with its focus on the gaming sector, might appeal to those seeking a more niche investment.

The expense ratios, ranging from 0.5% to 0.75%, are also a crucial consideration. While these fees may seem small, they can impact long-term investment returns, especially in a fast-evolving sector like the metaverse.

Incorporating Metaverse ETFs into Your Portfolio

Investing in metaverse ETFs requires a thoughtful approach. These ETFs are best suited as part of a diversified portfolio, complementing other investments. Investors should balance their metaverse exposure with investments in other sectors to mitigate risk.

Long-term investors might find these ETFs particularly appealing, given the metaverse’s potential for exponential growth. However, it’s essential to stay informed about technological advancements and market trends, as the metaverse is a rapidly evolving space.

Risks and Considerations

Investing in the metaverse, like any emerging technology, comes with risks. These include technological obsolescence, regulatory challenges, and market volatility. Investors should also be aware of the concentration risk if an ETF is heavily weighted towards a particular company or sector within the metaverse.

The Future of Metaverse Investing

The metaverse is at a nascent stage, and its trajectory is promising. As the technology matures and more companies enter the space, we can expect the metaverse to become a more significant part of the global economy. This growth will likely reflect positively on metaverse ETFs, making them an exciting investment for the future.

Conclusion

Metaverse ETFs offer a unique opportunity to invest in the future of digital interaction and technology. While they come with their set of risks, their potential in a rapidly advancing digital world is undeniable. As with any investment, due diligence, continuous learning, and consultation with financial advisors are key to making informed decisions.

Whether you’re a seasoned investor or new to the game, keeping an eye on the metaverse and its related investment vehicles could be a wise move as we step into a more interconnected digital era.

Hamilton ETFs, with assets under management exceeding $2.5 billion, is recognized as one of Canada’s swiftly growing ETF providers. They specialize in a suite of exchange-traded funds (ETFs) known for their innovative approach, aiming to maximize income and growth. These funds focus on reliable sectors in both Canadian and global markets. In this post, we present Hamilton ETFs reviews for HMAX, HDIV, UMAX, HYLD and HCA.

1 HMAX: Hamilton Canadian Financials Yield Maximizer

HMAX ETF is a new fund offered by Hamilton ETF. The fund invests in the Canadian banking sector. This fund aims to provide an attractive dividend yield (target 13%) using a covered call strategy. The strategy consists of writing call options on (50% of the portfolio) to collect premiums and maximize monthly distributions.

1- HMAX writes covered call options on 50% of the portfolio

From an investor’s perspective, the initial point indicates that only half of your investment portfolio will be exposed to potential growth. This portion of the portfolio operates under a covered call strategy, where the potential for capital gains is exchanged for a monthly income derived from dividends and option premiums. These premiums are earned whenever the fund sells a call option in the market.

In summary, I view HMAX as a hybrid fund. The first 50% resembles a traditional dividend fund, offering the prospect of receiving dividends and witnessing long-term portfolio appreciation. In contrast, the remaining 50% adopts a more conservative approach, primarily focused on income generation but lacking the potential for portfolio appreciation.

2- The fund is currently writing option At The Money (ATM) whereas similar funds are writing options OTM (Out of The Money).

I encourage you to refer to the table below for a clearer understanding of the second point’s significance. As shown, the HMAX fund has chosen At The Money (ATM) call options due to their superior profitability compared to Out of The Money (OTM) options. In a nutschell, this decision is driven by two critical factors. Firstly, ATM options generate higher premiums than an OTM strategy. However, it’s important to note that this choice comes with an elevated level of risk.

In options trading, risk is closely linked to the likelihood of the option being exercised by the buyer. So, in the case of OTM options, where the strike price exceeds the current stock price, the likelihood of the option being exercised is low. Conversely, with ATM options, where the strike price is very close or identical to the stock’s current price, the possibility of the option being exercised becomes more realistic.

2 HDIV ETF review: Hamilton Enhanced Multi-Sector Covered Call

HDIV is a passive covered call ETF. It’s ideal for investors who seek high dividend income and low volatility. HDIV invests in a basket of 7 covered call & sector focus ETFs. The fund manager uses also cash leverage of 25% to enhance yield and growth potential. The index tracked is The Solactive Multi-Sector Covered Call ETFs Index TR x 1.25.

The ETFs held within HDIV invest primarly in large corporations. In addition to using the covered call strategy, the funds ensure diversification of your investments across various sectors. See below the list of the 7 ETFs that make up HDIV:

Holdings

TICKER	NAME
HMAX	Hamilton Canadian Financials Yield Maximizer ETF
NXF	CI Energy Giants Covered Call ETF
GLCC	Horizons Gold Producer Equity Covered Call ETF
HFIN	Hamilton Enhanced Canadian Financials ETF
ZWU	BMO Covered Call Utilities ETF
HHL	Harvest Healthcare Leaders Income ETF
HTA	Harvest Tech Achievers Growth & Income ETF

Hamilton ETFs Reviews

All the funds that make up HDIV are covered call ETFs offered by various issuers such as: Harverst, BMO, CI Financial and Horizons.

3 UMAX: Hamilton Utilities Yield Maximizer ETF (13% Target yield)

Hamilton introduced a new ETF called UMAX, which focuses on the utilities sector (UMAX was launched June 14th 2023). This ETF is designed to provide investors with attractive monthly income while offering exposure to a diversified portfolio of utility services equity securities primarily listed in Canada and the U.S. UMAX aims to reduce volatility and enhance dividend income by employing an active covered call strategy.

Unlike some other income ETFs, UMAX does not utilize leverage. However, it still aims to generate higher monthly income for investors. It offers exposure to blue-chip Canadian utilities, including pipelines, telecoms, and railways. By implementing the covered call strategy, UMAX seeks to enhance monthly income and reduce volatility. Currently, the coverage through covered calls is approximately 50%.

UMAX targets a yield of 13% or more, with monthly distributions to provide consistent income.

Investors can access UMAX, along with other Hamilton ETFs, on the Toronto Stock Exchange (TSX). These ETFs can be included in various portfolios, such as RRSP, RRIF, DPSP, RDSP, FHSA, RESP, and TFSA. Additionally, for investors interested in a Dividend Reinvestment Plan (DRIP), they can contact their individual brokerage for setup details.

4 HYLD: Hamilton Enhanced U.S. Covered Call ETF

HYLD is a passive index ETF that uses a covered call strategy to enhance yield. It seeks to replicate a 1.25 times multiple of the Solactive U.S. Covered Call ETFs Index TR (SOLUSCCT), comprised of 7 higher-yielding U.S.-focused covered call ETFs.

List of funds that make up HYLD

TICKER	NAME
JEPQ	JPMorgan Nasdaq Equity Premium Income ETF
JEPI	JPMorgan Equity Premium Income ETF
QQCC	Horizons NASDAQ-100 Covered Call ETF
USCC	Horizons US Large Cap Equity Covered Call ETF
HHL	Harvest Healthcare Leaders Income ETF
XYLD	Global X S&P 500 Covered Call ETF
QYLD	Global X NASDAQ 100 Covered Call ETF
RYLD	Global X Russell 2000 Covered Call ETF
GLCC	Horizons Gold Producer Equity Covered Call ETF
NXF	CI Energy Giants Covered Call ETF

Hamilton ETFs Reviews

The fund is available for purchase in CAD-Hedged (HYLD) and USD-Unhedged (HYLD.U). The main idea behind HYLD ETF is to offer investors a higher yielding alternative to the S&P 500 with similar volatility (as per Hamilton’s website). It’s important to note we are talking here about ‘higher yielding’ alternative and not similar or higher performance that the S&P 500.

Covered call ETF usually protect against downside risk. This being said, the covered call strategy provides limited downside protection. Also, when you write a covered call, you give up some of the stock’s potential gains. Covered call ETFs will tend to have a higher yield and a lower performance that the portfolio they track.

5 HCA Stock – Hamilton Canadian Bank Mean Reversion

HCA is strategically designed to closely replicate the returns of the Solactive Canadian Bank Mean Reversion Index TR. This index implements a mean reversion trading strategy, a financial theory that suggests asset prices eventually move back to their historical average or mean over time.

In the context of the Canadian banking sector, the mean reversion strategy applied to the “Big Six” banks involves adjusting the weights of individual bank stocks based on their relative performance. Quarterly rebalancing is conducted to realign the portfolio with the mean reversion principle, ensuring that the weights are adjusted to capitalize on potential opportunities created by deviations from historical averages.

This mean reversion approach aims to capitalize on the tendency of asset prices, in this case, the stocks of Canada’s major banks, to revert to their historical mean after periods of divergence. The Solactive Canadian Bank Mean Reversion Index TR has demonstrated historical outperformance when compared to an equal-weight portfolio of Canada’s banks, showcasing the effectiveness of the mean reversion strategy in this specific market context.

Summary table Risk vs Benefits of a covered call strategy

Aspect	Description
Strategy	Selling call options on a security already owned in the portfolio
Name	Covered call strategy
Risk	Potential for limited upside if the stock price rises above the strike price
Benefit	Generates additional income through premium payments received from selling call options
Goal	To earn income from stock holdings while potentially reducing downside risk
Use	Often used by investors who are willing to sell their stock at a certain price if it reaches that level
Outcome	If the stock price stays below the strike price, the option expires worthless, and the investor keeps the premium payment. If the stock price rises above the strike price, the option buyer may exercise their right to buy the stock, and the investor must sell the stock at the strike price, but still keeps the premium payment.

Hamilton ETFs Reviews

In evaluating the differences between two well-known Canadian Exchange-Traded Funds (ETFs), namely XIC and XEI, it’s essential to delve into the distinct features each one presents. These ETFs are tailored to cater to varying investment strategies and objectives. Let’s explore the nuances in the XIC vs XEI comparison:

1. Fund Overview and Composition

The XIC ETF, known as the iShares Core S&P/TSX Capped Composite Index ETF, is specifically designed to track the S&P/TSX Capped Composite Index. This focus provides investors with exposure to a wide array of large-cap stocks in Canada, encapsulating a substantial portion of the Canadian equity market. Its diversified approach spans various sectors, effectively mirroring the composition and performance of the Canadian stock market. This diversification aims to offer a balanced representation of the Canadian economy, making it a suitable choice for investors seeking comprehensive market exposure.

On the other hand, the XEI ETF, or the iShares S&P/TSX Equity Income Index ETF, has a different focus. It tracks the S&P/TSX Equity Income Index, which targets companies known for their high dividend yields. The XEI ETF has a tendency to concentrate more on specific sectors, particularly financials and energy. These sectors are traditionally known for paying higher dividends. This concentration means that while the XEI offers the potential for higher income through dividends, it may also exhibit different risk characteristics compared to a more diversified ETF. The focus on high-dividend-yielding sectors makes it appealing to investors who prioritize income generation, specifically from dividends, in their investment strategy.

2. Performance and Returns XIC vs XEI

The XIC ETF is designed to offer investors insight into the Canadian stock market’s overall performance. It acts as a barometer, reflecting the broader trends and health of the Canadian economy. By mirroring the performance of a wide range of companies across Canada, it provides a comprehensive snapshot of the market’s state.

On the other hand, the XEI ETF is tailored to track the performance of companies known for their profitability and robust dividend-paying ability. The focus on high-dividend-paying stocks, however, means that the XEI can be subject to more volatility. This is because its performance is closely tied to the financial health and dividend distribution strategies of its constituent companies, which can fluctuate based on various economic factors.

3. Dividends and Yield

XIC
- Offers moderate dividend yields.
- Dividends are typically consistent with the broader market average.
XEI
- Known for higher dividend yields.
- Attractive for income-focused investors.

4. Risk and Volatility XIC vs XEI

The XIC ETF typically demonstrates a level of risk and volatility that is comparable to the broader market. It’s an appropriate choice for investors who aim to replicate the risk-return profile of the Canadian stock market as a whole. This ETF mirrors the market’s fluctuations, making it suitable for those looking to have a general market exposure that reflects the ups and downs of the Canadian economy.

In contrast, the XEI ETF is often associated with a potentially higher level of risk, primarily due to its focus on sectors that pay high dividends. The concentration in these high-dividend sectors means that its volatility can be significantly influenced by the performance of specific industries. As such, the XEI’s performance can fluctuate more than a broader market ETF, especially if the sectors it focuses on are experiencing economic stress or industry-specific challenges. This makes it a more suitable option for investors who are comfortable with higher risk levels in exchange for the potential of greater rewards from these dividend-rich sectors.

5. Expense Ratios and Fees

XIC (MER = 0.06%)
- Typically has a lower expense ratio.
- More cost-effective for investors focused on long-term, broad-market exposure.
XEI (MER = 0.22%)
- May have a slightly higher expense ratio due to its specialized strategy.
- The cost can be a consideration for cost-conscious investors.

6. Investment Suitability

XIC
- Well-suited for investors seeking broad exposure to the Canadian market.
- Ideal for a core portfolio holding.
XEI
- More suitable for investors seeking higher income and who are comfortable with sector-specific risks.
- Can be used as a complementary holding to diversify income sources.

Conclusion

Choosing between XIC and XEI depends on your investment objectives, risk tolerance, and preference for income versus total return. XIC offers broad market exposure, making it a solid choice for investors seeking a diversified portfolio reflective of the Canadian market. In contrast, XEI is more suited for those focused on income, willing to accept higher risk from sector concentration. Both ETFs have their merits, and the choice largely hinges on individual investment strategies and goals.

XUU ETF, also known as the iShares Core S&P U.S. Total Market Index, is a popular exchange-traded fund (ETF) that offers investors exposure to a broad range of U.S. equities. This ETF is designed to track the performance of the S&P Total Market Index, which includes large-, mid-, small-, and micro-cap stocks listed on U.S. exchanges. With over 1000 words, we can delve into various aspects of XUU.TO, including its investment strategy, performance, portfolio composition, costs, and its suitability for different types of investors.

Investment Strategy and Objectives

XUU.TO aims to provide long-term capital growth by replicating, to the extent possible, the performance of the S&P Total Market Index. The ETF invests in U.S. stocks across various market capitalizations, thus offering a diversified exposure to the U.S. equity market. This broad market exposure makes it an attractive option for investors seeking to invest in the U.S. economy as a whole.

XUU ETF Performance Analysis

XUU.TO’s performance is closely tied to the performance of the S&P Total Market Index. Historical performance data indicates that this ETF has provided solid returns over the years, although, like any investment, it comes with its share of volatility. The ETF’s performance is influenced by the overall health of the U.S. economy and the performance of the U.S. stock market.

XUU vs VUN

Key Differences

Index Tracked: XUU tracks the S&P Total Market Index, while VUN tracks the CRSP US Total Market Index. Although both indexes aim to provide comprehensive U.S. market exposure, there may be slight differences in their constituent stocks and weightings.

Fund Management: XUU is managed by BlackRock (iShares), and VUN by Vanguard, both highly regarded in the ETF space, but they may have different management styles and approaches.

MER: XUU has a lower MER at 0.08%, while VUN’s MER is 0.17%.

In summary, both XUU.TO and VUN.TO offer Canadian investors broad exposure to the U.S. stock market with a low-cost structure. The choice between them can depend on personal preference for a specific index or fund manager, as well as on the minutiae of their holdings and performance history.

Portfolio Composition

The portfolio of XUU.TO is highly diversified, comprising a wide array of sectors such as technology, healthcare, financials, consumer discretionary, and industrials. This diversification helps mitigate risk as the impact of a downturn in any single sector is cushioned by the performance of others. The ETF includes holdings in some of the largest U.S. companies, as well as a significant number of mid- and small-cap stocks, providing a comprehensive exposure to the U.S. market.

Costs and Fees XUU ETF

One of the advantages of XUU.TO is its low cost. ETFs typically have lower management expense ratios (MERs) compared to mutual funds, and XUU.TO is no exception. Its low MER (0.08%) makes it an attractive option for cost-conscious investors.

Suitability for Investors

XUU.TO is suitable for a range of investors, particularly those looking for exposure to the U.S. market as part of a diversified investment portfolio. It is an excellent choice for long-term investors who wish to benefit from the growth potential of U.S. equities. However, due to its exposure to the equity market, it may not be suitable for extremely risk-averse investors or those with a short investment horizon.

Risk Considerations

Investing in XUU.TO involves risks similar to investing directly in the U.S. stock market. These include market risk, where the value of the ETF can fluctuate due to changes in the stock market, and currency risk, as the ETF is exposed to U.S. dollar fluctuations. Investors should also be aware of the liquidity risk and the concentration risk, although the latter is somewhat mitigated by the ETF’s diversified nature.

Tax Implications for Canadian Investors

For Canadian investors, it’s important to consider the tax implications of investing in a U.S.-based ETF. Dividends from U.S. stocks may be subject to withholding taxes. However, Canadian investors can benefit from favorable tax treatment if they hold the ETF in specific types of accounts, like RRSPs or TFSAs.

Conclusion

In conclusion, XUU.TO represents a compelling investment opportunity for those looking to gain broad exposure to the U.S. stock market. Its diversified portfolio, low cost structure, and track record of performance make it an attractive option for a variety of investors. However, as with any investment, it is crucial for individuals to assess their investment goals, risk tolerance, and time horizon before investing in XUU.TO.

Explore “Top Industrial Sector ETFs 2024” for a comprehensive look at the industrial sector. This key economic area includes aerospace, defense, construction, and logistics. Industrial Sector ETFs offer easy access to this diverse market. They combine various sub-sector firms, providing a broad and effective investment approach for 2024.

Defining Industrial Sector ETFs

Industrial Sector ETFs are investment funds traded on stock exchanges, much like individual stocks. They are designed to track the performance of an index composed of industrial companies. These ETFs allow investors to invest in a broad range of industrial businesses, spreading risk across different sub-sectors and companies. This is particularly advantageous given the sector’s sensitivity to economic cycles and policy changes.

Top Industrial Sector ETFs 2024 in the US

Top Industrial Sector ETFs – Updated daily

Vanguard Industrials ETF (VIS)

Investment Objective: Seeks to track the performance of the MSCI US Investable Market Industrials 25/50 Index, encompassing stocks in the industrial sector, including construction, aerospace, and defense.

Inception Date: September 23, 2004.
Expense Ratio: 0.10%.
Assets Under Management (AUM): Approximately $4.0 billion.

Industrial Select Sector SPDR Fund (XLI)

Investment Objective: Aims to provide investment results that, before expenses, correspond to the price and yield performance of the Industrial Select Sector Index.

Inception Date: December 16, 1998.
Expense Ratio: 0.12%.
Assets Under Management (AUM): Around $14.0 billion.

iShares U.S. Industrials ETF (IYJ)

Investment Objective: Tracks the investment results of an index composed of U.S. equities in the industrial sector, offering exposure to U.S. companies that produce goods used in construction and manufacturing.

Inception Date: June 12, 2000.
Expense Ratio: 0.42%.
Assets Under Management (AUM): Approximately $1.2 billion.

Fidelity MSCI Industrials Index ETF (FIDU)

Investment Objective: Seeks to provide investment returns that correspond to the performance of the MSCI USA IMI Industrials Index, representing the industrials sector of the U.S. equity market.

Inception Date: October 21, 2013.
Expense Ratio: 0.08%.
Assets Under Management (AUM): Around $500 million.

Performance comparison

Top Industrial Sector ETFs 2024 in Canada:

BMO Equal Weight Industrials Index ETF (ZIN)

Investment Objective: Aims to replicate the performance of the Solactive Equal Weight Canada Industrials Index, providing exposure to the Canadian industrial sector with an equal weight approach.

Inception Date: October 20, 2009.

Expense Ratio: 0.55%.

Assets Under Management (AUM): 44M.

Advantages of Industrial ETFs

Composition and Diversity

The strength of industrial ETFs lies in their diversity. They cover a spectrum of companies, from those manufacturing heavy machinery to firms engaged in aerospace and defense. This variety ensures that the impact of sector-specific challenges or downturns is mitigated, providing a more stable investment option within the industrials space.

Indicators of Economic Health

Industrial companies are often seen as economic bellwethers. Their performance can indicate the health of the broader economy, as they are closely tied to consumer demand, business investment, and global economic trends. Industrial Sector ETFs, therefore, can be a strategic choice for investors looking to align their portfolios with the overall economic climate.

Conclusion

In navigating the complex tapestry of the investment world, Industrial Sector ETFs emerge as a strategic and prudent choice for a wide range of investors. By offering diversified exposure to a sector that is both a cornerstone of the global economy and a barometer of economic health, these ETFs present a unique opportunity. They encapsulate the dynamism of the industrial world – from manufacturing and aerospace to construction and logistics – while mitigating individual stock risk through broad diversification.

The appeal of Industrial Sector ETFs extends beyond their diversification benefits. They offer flexibility, lower costs, and a simple, efficient way to invest in a range of companies integral to economic growth and innovation. For long-term investors, in particular, these ETFs align well with strategies that capitalize on long-term economic trends like technological advancements and infrastructure development.

As we look ahead, the industrial sector is poised to continue playing a crucial role in shaping the global economy, influenced by factors like technological innovation, urbanization, and evolving global trade dynamics. In this context, Industrial Sector ETFs not only offer a gateway to participate in this sector’s potential growth but also serve as a tool for portfolio stabilization and long-term wealth generation.

In conclusion, whether you are a seasoned investor seeking to balance your portfolio or a newcomer aiming to tap into the industrial sector’s potential, Industrial Sector ETFs stand out as a valuable and strategic investment choice. As with any investment, it’s important to consider individual financial goals and market conditions, and consult with financial advisors to tailor investments to your specific needs and risk tolerance.

In the dynamic landscape of investment opportunities, the HMAX and BKCL ETFs emerge as compelling options for those seeking exposure to the Canadian banking sector with a unique twist—leveraging the power of covered call strategies. Hamilton ETF introduces HMAX, strategically delving into the banking sector with a focus on an attractive dividend yield of 13%. Meanwhile, Horizons Equal Weight Canadian Bank Covered Call (BKCL ETF) mirrors the performance of the Solactive Equal Weight Canada Banks Index, aiming to deliver monthly distributions through a blend of dividends and call options. Join us as we explore the strategies, portfolio allocations, and dividend histories of these two intriguing investment avenues (HMAX vs BKCL).

Executive summary

Aspect	HMAX (Hamilton ETF)	BKCL (Horizons ETF)
Strategy	Covered call strategy, writing ATM options	Covered call strategy, writing OTM options
% Portfolio	50% of the portfolio is involved in option strategy	50% of the portfolio is involved in option strategy
Option Type	ATM (At The Money) options	OTM (Out of The Money) options
Dividend Yield	Target 13%	Target 15%
Leverage	Not applicable (NA)	Controlled ratio of approximately 125%
Risk Approach	Higher risk due to ATM options with higher likelihood of exercise	Lower exercise probability with OTM options for risk mitigation
Focus	Hybrid model balancing growth and income	Diversification with a controlled leverage strategy

Investment objective Recap: HMAX vs BKCL

HMAX

This ETF is a new fund offered by Hamilton ETF. The fund invests in the Canadian banking sector. This fund aims to provide an attractive dividend yield (target 13%) using a covered call strategy. The strategy consists of writing call options on (50% of the portfolio) to collect premiums and maximize monthly distributions.

BKCL

The Horizons Equal Weight Canadian Bank Covered Call (BKCL ETF) focuses on diversified exposure to Canadian banks, aiming to replicate the Solactive Equal Weight Canada Banks Index. The fund employs a dynamic covered call strategy, selling options on underlying equities for additional income, acting as a buffer against market downturns. Notably, BKCL utilizes leverage at a controlled ratio of approximately 125%, amplifying performance during growth periods and aligning with the Underlying Index. This distinctive approach combines diversification, income generation, and strategic leveraging for investors seeking a balanced and potentially enhanced investment strategy.

HMAX vs BKCL! comparison

Strategy

	% portfolio	Option strategy	Dividend Yield	Leverage
BKCL	50%	OTM	15%*	1.25
HMAX	50%	ATM	13%*	NA

Covered call strategy – HMAX vs BKCL; * the target yield

HMAX strategically writes options At The Money (ATM), departing from the more common Out of The Money (OTM) approach. This decision is fueled by the higher premiums offered by ATM options, albeit with an elevated level of risk. ATM options increase the likelihood of exercise by the buyer, introducing a nuanced risk-reward dynamic into HMAX’s strategy.

BKCL, on the other hand, opts for OTM call options, where the strike price exceeds the current stock price. This choice aligns with Horizons ETFs’ general practice and aims to provide a buffer against potential market downturns. By selling options with lower exercise probability, BKCL seeks to balance income generation and risk mitigation.

In essence, while HMAX embraces a hybrid model, balancing growth and income, BKCL combines diversification with a controlled leverage strategy, utilizing OTM call options for a nuanced risk approach. The choice between these two ETFs hinges on an investor’s preference for risk tolerance, income generation, and growth potential.

Portfolio allocation

	Big Can Banks	Insurance	Asset Management
BKCL	100%	–	–
HMAX	76.4%	14.9%	10%

Best High-Interest Savings Account ETFs In Canada (2023)

Dividend history

BKCL Dividend History

Amount	Ex-Div Date	Record Date	Pay Date	Declare Date

0.2450	10/30/2023	10/31/2023	11/7/2023	10/24/2023
0.2570	9/28/2023	9/29/2023	10/6/2023	9/22/2023
0.2570	8/30/2023	8/31/2023	9/8/2023	8/24/2023
0.2570	7/28/2023	7/31/2023	8/8/2023	7/24/2023

Review of UMAX: Hamilton Utilities Yield Maximizer ETF (13% Target yield)

HMAX Dividend History

The fund pays monthly dividends. The distributions are paid monthly in cash.

Amount	Ex-Div Date	Record Date	Pay Date	Declare Date

0.1775	10/30/2023	10/31/2023	11/7/2023	10/24/2023
0.1775	9/28/2023	9/29/2023	10/6/2023	9/25/2023
0.1800	8/30/2023	8/31/2023	9/8/2023	8/24/2023
0.1800	7/28/2023	7/31/2023	8/8/2023	7/24/2023

How had Covered call ETF’s performed historically?

In historical contexts characterized by bear markets, range-bound markets, and moderate bull markets, a covered call strategy has typically demonstrated the ability to outperform its underlying securities. However, during robust bull markets, when the underlying securities experience frequent rises beyond their strike prices, covered call strategies have historically exhibited slower growth. Nevertheless, even in these bullish phases, investors typically realize moderate capital appreciation alongside the accrual of dividends and call premiums.

Intro

In the dynamic and ever-changing realm of the stock market, Canadian blue chip stocks have been synonymous with stability and robustness. Representing established companies known for their solid financial foundations, consistent dividend payouts, and reputable standing, these stocks are often seen as safe harbors in the tumultuous financial seas. However, even these stalwarts are not immune to market fluctuations. In a notable recent trend within the Canadian stock market, several of these blue chip stocks have reached their 52-week lows, marking a significant moment for investors and analysts alike.

This post aims to enlighten rather than advise. We will dissect what the 52-week low of these Canadian blue chip stocks really signifies, probe into the current state of these stocks, and offer insights into the wider economic and market forces impacting their valuation. Our goal is to equip both seasoned and novice investors with a deeper understanding of these movements, enabling them to make more informed, confident investment choices. Let’s dive into the world of Canadian blue chip stocks at their 52-week low, demystifying complex financial jargon and making the world of high finance more accessible to all.

Canadian Blue Chip Stocks at 52-week low

Source: Brachart

US Blue Chip Stocks at 52-week low

Source: Investing.com

15 Best Monthly Dividend Stocks in Canada for passive income

Full list of ‘Dividend Kings’ stocks by sector – 2023

The Significance of the 52-Week Low Metric

A 52-week low refers to the lowest price at which a stock has traded during the previous 52 weeks (or one year). This metric is often highlighted in financial news and analyses, but why does it garner so much attention? Primarily, a 52-week low serves as a barometer for gauging a stock’s current performance in relation to its past. Investors and analysts use this figure to assess how the stock has moved within a defined period, providing a snapshot of its lowest valuation point.

Factors Influencing Stock Prices

Stock prices are influenced by a myriad of factors, ranging from internal company performance to broader market trends and global economic indicators. For blue chip companies, these might include earnings reports, changes in leadership, industry shifts, and macroeconomic conditions like interest rate changes or geopolitical events. It’s crucial to understand that a stock reaching its 52-week low does not automatically signal a failing company. Instead, it could be a reflection of temporary market sentiments or external factors impacting the industry as a whole.

Interpreting the 52-Week Low

While some investors view a 52-week low as a warning sign, others see it as a potential opportunity. The key lies in interpretation and context. For long-term investors, a blue chip stock at its 52-week low might be attractive if the company’s fundamentals remain strong. It’s important, however, to differentiate between a temporary dip and a long-term decline. Conducting thorough research to understand why the stock has hit its low is essential. This includes examining the company’s financial health, market position, and potential for future growth.

Beyond the Price Tag

It’s easy to get fixated on the price alone, but savvy investors know that the context behind the price is equally important. A 52-week low can be the result of an overreaction to short-term events or could indicate deeper issues within the company. Distinguishing between these scenarios requires a keen eye on news, financial reports, and market trends.

In the next section, we’ll take a closer look at some of the Canadian blue chip stocks currently at their 52-week lows, offering insights into their industries and potential factors contributing to their current stock prices. Remember, investing is not just about catching a falling knife; it’s about understanding why the knife fell and whether it’s poised to rise again.

Risk Assessment in Investing in Canadian Blue Chip Stocks at Their 52-Week Low

Understanding the Risks Involved

Investing in Canadian blue chip stocks at their 52-week lows can be a double-edged sword. While the lower prices may be attractive, they come with inherent risks. The primary concern is whether the low represents a temporary dip or a sign of long-term challenges. It’s crucial for investors to discern whether the 52-week low is a result of market overreactions, sector-specific downturns, or fundamental issues within the company.

The Pitfalls of Market Timing

Attempting to time the market is a common pitfall for many investors. The notion of buying at the lowest point and selling at the peak is appealing but rarely achievable consistently. Market timing involves predicting future stock movements, which is inherently uncertain and risky. Investors should be wary of making decisions based solely on the assumption that a stock at its 52-week low is bound to rebound quickly.

Due Diligence is Key

Conducting thorough due diligence is paramount when considering an investment in any stock, especially those at their 52-week lows. This involves analyzing the company’s financial health, understanding its business model, evaluating its competitive position in the industry, and keeping abreast of any sector-specific risks. Investors should also review historical performance, management quality, and future growth prospects.

Long-Term Investment Strategies

For those considering investing in Canadian blue chip stocks at their 52-week low, adopting a long-term perspective can be beneficial. Blue chip companies are generally known for their stability and long-standing market presence, which can be advantageous in riding out short-term market volatility. However, it’s important to align such investments with personal investment goals and risk tolerance.

Conclusion

Investing in Canadian blue chip stocks at their 52-week lows can offer potential opportunities but requires careful consideration of the associated risks. Avoiding the trap of market timing, conducting diligent research, and maintaining a long-term investment horizon are key to navigating these waters. As always, aligning investment choices with individual financial goals and risk appetite is crucial for a sound investment strategy.

Latest posts:

In this post, we will review the top 5 monthly preferred shares ETF in Canada. These ETFs are a great way to diversify the fixed income portion of any portfolio. First, we will discuss what a preferred share is and the difference between a regular share. Afterward, we will talk about the features that a preferred share has and make it attractive to investors. Finally, we will compare the most popular preferred shares ETFs in Canada.

Definition of preferred shares

When you own a share of a company, you are part of the business. You have the right to vote and participate in shareholders’ annual meetings. Your return will depend solely on the performance of the company in the stock market and its dividends. It’s rewarding, but it’s also risky. Preferred shares are a bit different. You don’t get to vote, and you have no ownership in the business. Your preferred share entitles you priority to dividends based on a percentage agreed upon in advance. The ‘priority’ means the company needs to pay you first before paying the regular shareholders. In case of bankruptcy, you have the first claim on the assets of the company. So, in essence, a preferred share is a kind of hybrid product that shares specific characteristics of bonds (a bit of safety) and some of the regular claims (potential for appreciation).

Investors can invest directly in preferred shares as they trade like stocks. Or, they can buy preferred shares ETF to achieve diversification and reduce risk.

Preferred shares features

A preferred share grants the holder a percentage return based on its par value. There are several risks associated with preferred shares:

The issuer can decide not to pay dividends in a particular year because of bad financial results. Unless you hold a cumulative right, you will not receive your dividends for that year;
The preferred share price tends to rise if the price of the regular share rises or lose value if the opposite scenario occurs;
Preferred shares are sensitive to interest rates. When interest rates are low, preferred shares are in demand because their dividend is much higher than other fixed-income products. If the interest rate rise, investors will turn to safer fixed-income products such as bonds. Consequently, the price of preferred shares will decline;
An issuer of preferred shares can decide to recall his shares or offer the option to convert them to regular stocks anytime. This is assuming the shares that were issued are ‘callable’.

What’s a preferred shares ETF

It’s ETFs that invest mainly in preferred shares. These ETFs are pretty popular because they offer investors attractive yields with the possibility of capital appreciation. Among all fixed-income products, there’s no question that preferred shares usually provide the best return compared to bonds. This being said a preferred share carries more risk than owning a bond.

Methodology

I started by selecting all Fixed income ETFs offered in Canada. I considered in my comparison only ETFs that pay more than a 3% dividend yield. 3% is a reasonable payout, especially if it’s combined with an exciting capital appreciation. Most fixed-income ETFs holders seek a regular dividend income. So, it’s an essential condition.

Second step: I ranked these preferred shares ETFs in Canada based on the past 52 weeks’ performance.

Third step: All ETFs in the list should have assets under management above 100 M. Generally speaking, the higher the AUM, the better the liquidity because of the high volume of shares exchanging hands daily. This factor is important because investors should buy and sell an ETF at a reasonable spread. The spread is the difference between the bid and the asking price. For liquid assets, the spread can be as little as 0.005$, while for low AUM ETFs, the spread can easily reach 0.05$. If you buy 100 shares, that’s 5$ cost in addition to the commission you’re paying to the broker

Best ETF Canada – Full guide 2023

8 Canadian Dividend Stocks with high dividend growth

Best dividend stocks to buy – Dividend aristocrats 2023

Table 1: Top 5 Preferred shares ETFs fundamental data

Name-Ticker	AUM	MER
BMO Laddered Pref Share – ZPR	2,185	0.50
Horizons Active Pref Share – HPR	1,602	0.64
Ishares S&P TSX CDN Pref – CPD	1,386	0.50
RBC Canadian Pref Share – RPF	904	0.58
Dyn Ishares Active Pref Shares – DXP	697	0.67

Source: Barchart

Table 2: Top 5 Preferred shares ETFs Performance

Updated daily – average return

Table 2: Top 5 Preferred shares ETFs Dividend yield

ETF	Div Yield
ZPR	5.74%
HPR	5.64%
CPD	5.26%
RPF	5.35%
DXP	4.47%

Source: Yahoo Finance

Our favourite

ZPR BMO Laddered Preferred Share is the most popular preferred shares ETF in Canada with over 2 Billions in Assets. It has a low MER compared to its competitors. It also offers a high dividend yield which is really attractive for investors.

ZPR has been designed to replicate, to the extent possible, the performance of the Solactive Laddered Canadian Preferred Share Index, net of expenses. ZPR has short-duration preferred shares. It also has rate reset features. If you think we will see rising rates, which is a reasonable assumption, they will ratchet their rates up to keep up with rising interest rates. If rates rise, it does participate and offset some inflation.

Thanks to the rate reset feature, ZPR offers more stability. Additionally, it is professionally managed by BMO Global Asset Management.

Dyn Ishares Active Pref Shares (DXP)

Invests primarily in a diversified portfolio of preferred shares of Canadian based businesses.

Amount	Ex-Div Date	Record Date	Pay Date	Declare Date

0.0720	11/24/2023	11/27/2023	11/30/2023	11/20/2023
0.0720	10/25/2023	10/26/2023	10/31/2023	10/19/2023
0.0720	9/25/2023	9/26/2023	9/29/2023	9/19/2023
0.0720	8/25/2023	8/28/2023	8/31/2023	8/21/2023
0.0720	7/25/2023	7/26/2023	7/31/2023	7/19/2023
0.0720	6/26/2023	6/27/2023	6/30/2023	6/20/2023
0.0720	5/25/2023	5/26/2023	5/31/2023	5/18/2023
0.0720	4/24/2023	4/25/2023	4/28/2023	4/18/2023
0.0720	3/27/2023	3/28/2023	3/31/2023	3/7/2023
0.0720	2/22/2023	2/23/2023	2/28/2023	2/15/2023

RBC Canadian Preferred Share (RPF)

The RBC Canadian Preferred Share ETF seeks to provide unitholders with exposure to the performance of an actively managed portfolio of rate reset preferred shares issued by Canadian companies, selected on the basis of fundamental analysis, credit research and interest rate sensitivity analysis.

Amount	Ex-Div Date	Record Date	Pay Date	Declare Date

0.0900	11/22/2023	11/23/2023	11/30/2023	11/16/2023
0.0950	10/23/2023	10/24/2023	10/31/2023	10/17/2023
0.0950	9/21/2023	9/22/2023	9/29/2023	9/15/2023
0.0950	8/23/2023	8/24/2023	8/31/2023	8/17/2023
0.1000	7/21/2023	7/24/2023	7/31/2023	7/18/2023

Horizons Active Pref Share (HPR)

The investment objective of the Horizons Active Preferred Share is to provide dividend income while preserving capital by investing primarily in preferred shares of Canadian companies. The ETF may also invest in preferred shares of companies located in the United States and fixed income securities of Canadian and U.S. issuers. The ETF, to the best of its ability, seeks to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times. HPR is a popular ETF and has asset under management in excess of 1 Billion dollars.

Amount	Ex-Div Date	Record Date	Pay Date	Declare Date

0.0340	10/30/2023	10/31/2023	11/7/2023	10/24/2023
0.0360	9/28/2023	9/29/2023	10/6/2023	9/22/2023
0.0360	8/30/2023	8/31/2023	9/8/2023	8/24/2023
0.0360	7/28/2023	7/31/2023	8/8/2023	7/24/2023

BMO Laddered Preferred Share Index ETF (ZPR)

The BMO Laddered Preferred Share Index ETF (ZPR) has been designed to replicate, to the extent possible, the performance of the Solactive Laddered Canadian Preferred Share Index, net of expenses. The Fund invests in and holds the Constituent Securities of the Index in the same proportion as they are reflected in the Index.

Amount	Ex-Div Date	Record Date	Pay Date	Declare Date

0.0450	10/27/2023	10/30/2023	11/2/2023	10/20/2023
0.0450	9/27/2023	9/28/2023	10/4/2023	9/20/2023
0.0450	8/29/2023	8/30/2023	9/5/2023	8/22/2023
0.0450	7/27/2023	7/28/2023	8/2/2023	7/20/2023
0.0450	6/28/2023	6/29/2023	7/5/2023	6/21/2023

Ishares S&P TSX CDN Pref (CPD)

Seeks to replicate the S&P/TSX Preferred Share Index, net of expenses.

Amount	Dividend Type	Ex-Div Date	Record Date	Pay Date	Declare Date

0.0540	Regular	11/21/2023	11/22/2023	11/30/2023	11/15/2023
0.0540	Regular	10/25/2023	10/26/2023	10/31/2023	10/19/2023
0.0530	Regular	9/25/2023	9/26/2023	9/29/2023	9/19/2023
0.0530	Regular	8/25/2023	8/28/2023	8/31/2023	8/21/2023

Disclaimer

The data on this website is for your information only. It does not constitute investment advice, or advice on tax or legal matters. Any information provided on this website does not constitute investment advice or investment recommendation nor does it constitute an offer to buy or sell or a solicitation of an offer to buy or sell shares or units in any of the investment funds or other financial instruments described on this website. Should you have any doubts about the meaning of the information provided herein, please contact your financial advisor or any other independent professional advisor.

Covered Call Exchange-Traded Funds (ETFs) have captured the attention of income-focused investors, presenting a unique avenue for generating returns through options trading strategies. However, as promising as they may sound, I choose to abstain from investing in these funds due to a myriad of reasons that delve into the intricacies of distribution yield stability, potential capital erosion, performance concerns, and the often-overlooked tax implications.

Understanding Covered Call ETFs: A Brief Overview

Before delving into the reasons behind my decision not to invest in covered call ETFs, let’s first establish a foundational understanding of what these investment vehicles entail. Covered call ETFs utilize a strategy known as covered call writing. In this approach, the fund holds a diversified portfolio of stocks while simultaneously selling call options against those holdings.

When an investor sells a call option, they receive a premium from the buyer. This premium provides additional income for the fund, enhancing its overall yield. However, it comes with a trade-off: the potential obligation to sell the underlying asset if the option is exercised. This strategy is often employed to generate income in markets where price movements are relatively stable or mildly bullish.

Now, let’s dissect the reasons that guide my decision to steer clear of covered call ETFs.

HTA ETF: Full review of Harvest Tech Achievers Growth & Income

ZWC – Full review of BMO High Dividend ETF Covered Call

1. Volatility-Driven Yields: The Stability Conundrum

Funds such as HYLD, HMAX, HDIV, BMAX, among others, market themselves with the allure of high yields. However, it’s crucial to understand that these elevated yields are intricately tied to market volatility. The income generated from covered call options is, to a significant extent, dependent on market dynamics.

In times of heightened volatility, the premiums collected from selling call options can be substantial, contributing to the funds’ ability to pay attractive distributions. However, when volatility diminishes, as it inevitably does, the income generated from these options may no longer be sufficient to maintain the current distribution rate. This creates an inherent instability in the distribution yield, making it a less reliable source of income in more stable market conditions.

It’s worth noting that investors seeking a broader perspective on the historical performance of covered call ETFs can explore options issued in the US, such as QYLD and RYLD. These ETFs have a much longer history than their Canadian counterparts. By examining their dividend yield trends on platforms like Yahoo Finance, investors can observe that the yields were lower in the past and increased only in recent years, coinciding with heightened market volatility. This historical context provides valuable insights into the relationship between market conditions and the yields of covered call ETFs.

2. Capital Erosion and Performance Concerns: Balancing Risk and Reward

One of the primary reasons for my cautious stance on covered call ETFs is the potential for capital erosion. While the strategy provides a steady stream of income, it comes at the cost of limiting the upside potential for the portfolio. By selling call options, investors cap their gains if the market experiences significant upward movements.

Many covered call ETFs in Canada, particularly those with ambitious target yields, face the challenge of delivering performance that aligns with investor expectations. The pursuit of higher yields may push fund managers to adopt active option strategies or use aggressive options like At-The-Money (ATM) instead of safer Out-of-The-Money (OTM) options. This tactical shift can result in lackluster performance, especially when benchmarked against broader market indices.

It’s crucial for investors to weigh the desire for income against the potential impact on overall portfolio performance. Opting for covered call ETFs might mean prioritizing a steady income stream over the potential for capital appreciation.

3. Tax Implications: Navigating the High-Income Landscape

An often overlooked aspect of investing in covered call ETFs is the potential tax consequences. While the allure of a high monthly income is enticing, investors must consider the implications at the personal tax level. Unless your dividend portfolio is your sole source of income, the additional income generated from covered call ETFs may push you into a higher tax bracket.

The tax efficiency of an investment is a crucial consideration for maximizing after-tax returns. While high yields may look appealing on paper, the net return after accounting for taxes might not align with initial expectations. Investors should consult with tax professionals to understand the specific implications based on their individual financial situations.

In Summary: A Nuanced Approach to Income Generation

In conclusion, covered call ETFs can serve as a source of steady income, but they come with their share of complexities and trade-offs. The reliance on market volatility, the potential impact on portfolio performance, and the often-overlooked tax implications make these funds a nuanced choice.

If seeking income is the primary objective, investors must carefully evaluate their risk tolerance and financial goals. Understanding the dynamics of covered call strategies, acknowledging the potential for distribution yield instability, and factoring in the tax implications are essential steps in making an informed investment decision.

As an investor, I opt for a more balanced approach that considers both income and long-term growth, steering clear of strategies that might compromise the latter. While covered call ETFs may find a place in certain portfolios, it’s crucial for investors to conduct thorough due diligence and align their investment choices with their broader financial objectives.

HDIF (Harvest Diversified Monthly Income ETF) is a relatively new fund from Harvest ETFs (created on Feb 2022). It’s a covered call ETF and its main target audience are income/dividend investors. In this post, we will be reviewing the fund’s objective, fees and performance so far.

Executive Summary

Fund Objective

Harvest Diversified Monthly Income ETF operates as a fund of funds, meaning this ETF invests in other ETFs to offer investors diversification across various sectors of the economy, including Healthcare, Global Brands, Technology, Utilities, and US Banks. The primary objective of HDIF is to deliver a higher yield than traditional dividend ETFs through the utilization of a covered call strategy.

With a covered call strategy, investors not only receive dividends but also earn premiums when the fund issues covered calls. In total, the fund provides an appealing dividend yield, typically exceeding 9%. The fund managers aim to maintain a ‘target yield’ of 8.5%, and thus far, dividends have been consistently distributed on a monthly basis at the targeted rate.

It’s important to note that all the funds comprising HDIF are covered call ETFs offered by Harvest.

Ticker	ETF Name
HTA	Harvest Tech Achievers Growth & Income ETF
HBF	Harvest Brand Leaders Plus Income ETF
HLIF	Harvest Canadian Equity Income Leaders ETF
HHL	Harvest Healthcare Leaders Income ETF
HUTL	Harvest Equal Weight Global Utilities Income ETF
HUBL	Harvest US Bank Leaders Income ETF
TRVI	Harvest Travel & Leisure Income ETF

Please visit issuers’ website for most up-to-date data

Here are some additional key details about HDIF:

Quarterly Portfolio Reconstitution and Rebalancing:

The fund’s portfolio undergoes reconstitution and rebalancing at least once every quarter. This process helps ensure that the fund’s holdings remain aligned with its investment objectives.

Covered Call Strategy on Up to 33% of Equity Securities:

HDIF applies a covered call strategy to a portion of the equity securities held in its underlying portfolios. Specifically, this strategy is employed on up to 33% of each equity security, allowing the fund to potentially enhance its returns through covered call options while managing risk.

Video

Can you lose money on a Covered Call ETF?

Covered call ETFs can be characterized by their inherent volatility, and their returns are intricately tied to the performance of the underlying asset. While these ETFs often provide generous dividends, it’s crucial to recognize that a lackluster performance in the ETF’s price can potentially negate these benefits. Therefore, the preferred strategy for investing in these types of ETFs is typically a long-term approach. In the context of a robust bull market, where the price of the underlying stock surpasses the strike price plus the option premium, the covered call writer may find themselves underperforming.

Nevertheless, covered call writers can expect to outperform in scenarios where they earn the option premium, particularly when compared to merely holding the stock in markets that are flat, decreasing, or experiencing only mild increases. This is because the option premium provides an additional income source that can cushion the impact of market fluctuations and potentially enhance overall returns, especially when market conditions are less favorable.

	Covered call strategy
Bull Market	lags in terms of performance
Modest Bull Market	Outperforms the index
Volatile market (frequent ups and downs)	Outperforms the index
Beat market	Outperforms the index

Quick summary: HDIF ETF review

This investment offers a compelling combination of benefits, including the potential for higher monthly income through its covered call strategy, diversification to spread risk across various assets or sectors, and access to 25% leverage at institutional rates, which come at a cost lower than that of retail margin accounts.

HDIF ETF Review: MER

The management expense ratio is 1.98%.

HDIF vs HDIV

Comparing HDIF by Harvest to HDIV by Hamilton, these two ETFs share striking similarities. Both employ a diversified approach and utilize the covered call strategy along with 25% leverage. However, their composition differs significantly. HDIF exclusively holds six ETFs issued by Harvest, while HDIV comprises seven covered call ETFs from various issuers, including BMO, Horizons, and Harvest, among others. As both funds are relatively new, it’s premature to declare a clear winner in this comparison. It’s worth noting that HDIV has not yet disclosed its Management Expense Ratio (MER), but given its diverse holdings from various issuers, one might anticipate a higher MER compared to HDIF.

These two ETFs are very similar. Both are diversified and use the covered call strategy with 25% leverage. HDIF hold 6 ETFs all issued by Harvest, whereas HDIV holds 7 covered call ETFs from various issuers (BMO, Horizons, Harvest…etc). It’s too soon to establish a winner here, since both funds are relatively new.

HDIV did not yet publish their MER. But since the fund is made up of funds owned by various issuers, one would expect the MER to be much higher than HDIF.

How profitable are covered call ETFs?

Covered call ETFs gained widespread popularity due to their attractive high dividend yields. Fund managers often market these products as offering a high yield and low volatility alternative to direct exposure to popular market indexes like the NASDAQ or S&P 500, as well as highly volatile sectors such as Gold or Oil. While these claims hold true to some extent, it’s crucial to recognize a significant drawback associated with the covered call strategy: it tends to underperform the tracked index significantly during bullish market conditions. Therefore, investors seeking substantial growth may find the covered call strategy disappointing.

In our view, HDIF can cater to a diverse range of investors:

It can serve as a tactical option during market corrections for growth-oriented investors, potentially offering opportunities for strategic plays.
For conservative buy-and-hold investors, it provides a means of earning income, offering a steady source of dividends and aligning with a conservative investment approach.

HDIF Dividends yield and Price performance

Inception Date

Feb 11th, 2022

ETF	Div Yield
HDIF	10.91%

As of September 23rd – Yahoo finance

HDIF pays a monthly dividend.

ETF	1M %Chg	3M %Chg	1yr
HDIF	-1.19%	-2.23%	4.26%

As of September 23rd – Yahoo finance – HDIF ETF review

HDIF ETF review: Dividend distribution

Amount	Ex-Div Date	Record Date	Pay Date

0.0708	6/29/2023	6/30/2023	7/7/2023
0.0708	5/30/2023	5/31/2023	6/9/2023
0.0708	4/27/2023	4/28/2023	5/9/2023
0.0708	3/30/2023	3/31/2023	4/6/2023
0.0708	2/27/2023	2/28/2023	3/9/2023
0.0708	1/30/2023	1/31/2023

Sector allocation

Sector	% Allocations
Financial Services	31.8%
Healthcare	21.8%
Technology	23.4%
Comm. Services	15.0%
Utilities	13.7%

Please visit issuers’ website for most up-to-date data

HDIF ETF review: Portfolio

Ticker	ETF Name	Weight
HTA	Harvest Tech Achievers Growth & Income ETF	20.7%
HBF	Harvest Brand Leaders Plus Income ETF	19.8%
HLIF	Harvest Canadian Equity Income Leaders ETF	19.4%
HHL	Harvest Healthcare Leaders Income ETF	19.3%
HUTL	Harvest Equal Weight Global Utilities Income ETF	19.0%
HUBL	Harvest US Bank Leaders Income ETF	16.9%
TRVI	Harvest Travel & Leisure Income ETF	9.7%
	Cash and other assets and liabilities	(24.9)%

Please visit issuers’ website for most up-to-date data

Asset Class

US Equity	63.5%
CDN Equity	50.4%
Int’l Equity	13.0%

Please visit issuers’ website for most up-to-date data