I really dont understand how anything beats total return... maybe I am misunderstanding you, but if you look at something simple like ZWB covered called banks, and ZEB straight up bank etf... ZEB wins over long term... you can create your own dividend by just selling some shares slowly... either that or your money is gone in a few years.. Look at HMAX, pays 15% but is down 17% in a year... Thats horrible !! plug your numbers into portfoliovisualizer and see for yourself.. total returns are the best... I would rather get a stock that grows 15% a year and take out 10% and still have some growth than buy something that pays 15% and end up down 17% like hmax..
Never say too old to worry. We are going to live for ever. Wish you many more years of happy and health with a lot of love and passive income. Good luck 🤞
@@itayyahel Live forever hahahhahahahahhahahhahaha. Mamma mia. No, everyone must say to themselves that they will not live forever, early in life. You will drop dead just like that fly, or bee, or donkey or snake drops dead and will become a meat for earth. Simple as that.
Use the hybrid strategy of covered call etfs and growth etfs/stocks. When growth etfs are on sale near moving averages or below, use the dividends of covered call etfs to buy growth etfs (DCA) and sell when in 10-30% profit and put back in dividend etfs/stocks. Rinse and repeat. NFA
Thanks for your opinion and your explanation, very well done. I just invested in a covered call etf for income. I definitely am interested in the downside risks 😊Because of this video I am now a subscriber 😊
I like this kind of videos,just talking. Feels like a podcast ( i miss the fact that you uses to invite guests ) Did PII for one year to supplement my 6 months holidays in Europe for some extra cash. This strategy worked well for me at that specific moment of my life. By hey, you need a lot invested otherwise not worth it. Try you gonna see whar i mean by that . Moved back to growth. My huuuuge unrealised growth, which gives me a big smile whenever i check my portofolio every 2 weeks when buying more shares. All strategies are good. There is no best way of doing... Best is what best for You ? In a specific time of your life and your goals. And nothing is stopping you doing a mix of many strategies. Investing is fun ! Good luck and enjoy. Good luck to y'all.
Hi, good video, you are right for the long term. I used to build my own portfolio, using software and python programs to choose my stocks and optimize my portfolio. In doing that I learned not to keep loosers and take my profit when they get to my target. The advantage I see with CC ETF is that I don't have to sit in face of my computer from 9:30 to 16:00 each trading day! I am targeting high yield and I sell if the etf is not performing well. Up to now, I am not loosing too much, less than 1% total return and the distribution are more than enough for my needs. I think it is a good thing to rebalance or switch from one etf to another more often than not. I look forward to see the next on risk! That is not an easy part with those ETF....because the lack of information! Continue your good job. 😄
Bro thank you :). Lot of respect and love to you and Erica :). Always thankful I found you :). I am generating income out of my Covered calls to replace my active income.
It's all about how you want your money back...monthly as a dividend NOW or a lump sum when you sell (roughly) LATER. I kinda like a mix, but I want a dividend on everything.
Thank you Adrian! Very informative and clear explanation. I recently learned that if you live in Ontario or BC you can have $50K CAD income paying 0 or very little income tax if your income comes from eligible dividends. Would be nice to know your opinion on the subject and what ETFs have a good eligible dividends and low downside risk. I hardly can find any info on if an ETF's dividends are eligible. Would be nice if you share where you search for such info. I am about to retire and still need to grow my accounts but then I will switch to income generating strategies. Idea of getting 100K+ (for couple) while paying little or no tax is attractive to me. Thanks for all you do for us. Appreciated!
Check each funds' website for the tax treatment. I struggle with this as well as I want those E div's. Most of the etf's are a combo of E div's, capital gains and ROC but the E div's portion usually low however several split share funds - class A and preferreds pay out majority in E div's.
Got out of mutual funds last year as I started to learn more and do my own investing. MFs the fees are too high and the returns to average in my opinion plus I enjoy managing a portfolio!
I was debating MF's with my advisor, who is also my friend about the real value of the 2% fee. The best comprimise we could really come to is that your paying it to attempt to remove volatility. One will never beat the market, regardless of what fee you pay @@Dividend-Shark90
I have been using CC Etfs for years, I still have mixed emotions over total vs CC returns. In my mind, I catergorize the two for different purposes. I am retired, I need the monthly income, but I still need modest growth.
Would love your thoughts on this. If the underlying always outperforms the covered call ETF in the long term, do you think this tactic will work: Say you have $100,000 to invest. Instead of investing in QQQY you invest in QQQ BUT see how much QQQY pays each month and sell that amount of your QQQ position to pay yourself a "monthly dividend" no matter if QQQ is down or up. Do you think you would run out of money here or end up outperforming the covered call ETF? What do you think? I would love to see this back-tested.
Not a good idea. You would decrease your share count. With income etf’s your share count stays the same or goes up if you reinvest the income generated each month. You would run out of money
the covered call fund will have days when they generated money for free because the calls expired out of the money and you will just be burning money to keep up the with the payout on those days
@@PassiveIncomeInvesting I suspect the same but I am not fully sure why. I tried backtesting and of course total returns means the non income fund outperforms. But I am guessing in extended flat or bear markets I will bleed my capital doing it this way since those are the times the covered call ETF outperforms.
Great explanation. Simple and straight to the point about the 'pros' & 'cons' of Covered Call. Is there a video already that describes differences between leverage & cover calls?
You have always said, and are very clear that covered call etfs, is about income. I have listened to some of the other advice. It’s aimed at long term investors. For me, I want the income. As I get older, I can later go into the principle. We don’t live forever.
Agree 100% with what you stated. However, an additional factor which ties directly into the defensive aspect of what you stated is peace of mind and not needing to be overly concerned when see the value of your fund drop dramatically, like a lot of them have during the recent/current bear market (no idea if it is over now or not). When are getting very little yield then all of your returns are on paper and only realized when you sell, so you only get maximum total return when you sell at the top of a Bull market, but who knows when that will be? Until I switched to this income strategy I was constantly stressing about my stock based investments. No more. Thanks so much for teaching me about this strategy through your channel.
Right now I focus on div income and growth. If growth is doing well, I'll trim and invest those funds into div income. As I get older, ultimate growth is less important as time plays a factor (trying to gauge properly with market ups and downs). Because of the time factor I'm realistic about stock choices that might require several years to reach full potential. So, the growth aspect for me will become less important with time. I'd be super interested in a segment about CC ETF risks.
I buy AIPI (and some other high yeild) and use the income to buy other cc ETF's. Don't buy US cc ETFs in your TFSA, you wont get the 15% witholding tax back. I also use the tradingdview dividend adjust chart to see the actual (this chart does not re-invest, it just takes away the gap down when dist. are paid) . In a slow grind bull market, these ETFs are killing it. Making more than the underlying. CC ETFs on the US exchange in an RRSP are great. I own cc ETF on TSX in my non-registered accounts. I use the income to buy dividend stocks. I still feel that I'm missing some important info or relaization...
I like the covered call ETFs , when figuring Total return the part people forget is if you need the income, you would need to sell x number of shares each month to meet that income. so after 5 years you would not own as many shares, so even if the stock went up you do not capture all that gain, so I feel the return my be a lot closer then people think, but only in that situation. What is your thought?
I use cover call ETFs and at the moment I keep reinvesting the income in more covered call ETFs. Thus far the overall value of my portfolio keeps growing as is the income. It is the reinvested income that translates into overall growth. I enjoy your channel. You never pretended to be preaching gospel and as an investor it is my responsibility to exercise due diligence.
I agree 💯 with this. I reinvest all my dividends and consider this the "growth" of the etf. Almost at the point where I am buying a full share every month with the dividends. I have only been investing for less than 6 months, but I have done a lot of research. The covered call etf strategy is exactly what I was looking for. I will let my investments snowball, and hopefully be financially independent within 10 years.
Before I started buying CC ETFs I did CC on Spy and single stocks. I outperformed the underline in total return for months. So you could outperform but your income would be lower because many times you would have to write OTM (from 5 to 10%) so shares wouldn't get called away. It's really the income part that sets these etfs apart from a Total return perspective.
Hi, I’ve only looked at QYLD, and it has consistently produced 1% return per month which is way higher than the total returns on a regular ETF. Are you saying that if the market becomes bullish, that 1% will vanish?
Great informative video! I recently just started swapping my stocks to CC ETFs and I can say my income is pretty impressive from where I was. Being close to retirement the more money I make the better. Thankful to have found this channel!
If we can see in their prospectus in what products these ETF invest, and what they do, why don't we do it our self? Because if we do the same Cov. Call Strategies in the same products, we get the same result and more money, because we don't pay them fees. I maybe miss something, right? Thanks very much for your educational videos.👍
Thanks for smart response to the negative people about CC ETF. I have two CC ETF (CRF). Can I ask you why you sold your CRF? Did you see any negative issues with them?
Hello sir.. Speaking about a bull market, if CC ETFs have a limited upside, would the inverse of a CC capture all the upside with the risk being on the downside?
Thanks for your honesty. A perfect example is JEPI that outperformed in 2022 and underperformed in 2023. But I consider it a hedge to downsides in my portfolio.
I use CC ETFs in my IRAs to pump up other assets. I evaluate for NAV erosion monthly, and put the dividends in the most favorable location at that time.I do not plan to withdraw anything for 5 years.
Hi passive income investment, what about qdte vs qqq? Qqq will still outperform long term? Or xdte vs spy? Assume all dividends reinvested. Qdte and xdte is still new funds.
I think the popularity of CC ETFs is because the US market prioritises capital appreciation over income and there's increasing demand for the latter. The UK market by comparison is somewhat "widows and orphans" these days - much more dividend focused. It's a very American way of doing things - don't change corporate culture, invent a new industry. I'd say they're a good automatic hybrid alternative to drawdown later in life. But of course younger people may want holidays today rather than a holiday home when they're much older, which is fine. (Pros use calls and puts as a controlled way to exit and enter positions, which is actually their intended function.)
I am FIRE since january 2024 with cover call ETF and split-corp. 42 years old and I do not work EVER guys. People planning FIRE based on the 4% yield rule. I have 14% yield with CC ETF. This video confort my decision. Thanks Adrian.
Don't make long term plans based on 14% annual income. To be safe use the 4% rule. At 42 years old, you will see a lot of unexpected things happen for the next 42 years and beyond.
@@PassiveIncomeInvesting The old monkey once said : Focus on the FI not the RE. I am currently reorganizing my life toward a better and more human life. FIRE in an adventure, not a retirement.
I really appreciate your clear & concise explanation of covered calls. I am in the accumulation stage at the moment but will pivot to passive income investing when it’s time to pull the parachute. Thanks for all the great content.
A better defense than selling calls is buying puts. If the shares go up you only miss out on what you paid for the puts. If the shares go down the puts will be worth whatever the difference in your strike and the price of the shares at expiration. A covered call can only protect the amount of downside equal to the premium you receive and it takes all the upside above your strike price.
If the stock(s) for that covered call goes, doesn't the value of the covered call go up too? For example, YTLS owns actual shares of TSLA. So, if the price of TSLA goes up, you might get less return perhaps but the value of YTSL should appreciate as well. You bought YTSL at round $14.xx and it went all the way up to $30+ as the price of TSLA went up. So, it is positively correlated with price of TSLA stock.
If the stock goes up too fast, it is more likely to reach the strike price of the covered call contract. As such, the shares committed to the covered call must be sold at the strike price to the holder of the covered call. As a result, the fund can no longer achieve any growth from the shares it lost if the stock continues to appreciate. That's why covered calls limit the upside of a rising stock. Of course, there is no risk of losing the shares if the stock price declines or stays flat. In all cases, the fund benefits from the premiums it collects from selling covered call contracts.
Premise behind income investing: ‘A Bird in the Hand is Worth Two in the Bush' If we ever get another decade like the 1970’s, income investing will dominate.
I don't "need" more money in my retirement - I just like having $$$$$$ dividends reinvested back. But I get that some people "need" total return. Also nothing wrong with a balanced or mixed approach - that works too. Great video as always.
Thanks for the explanation, Adrian. Since I'm still learning about investments, I believe the covered calls are great for me to have less volatility and still be able to use the dividends to invest in other products, for example. Thank you.
Good video. Someone who’s already well allocated to long term appreciation in other assets and simply needs 1) cash flow and 2) damped downside risk… perfect solution imo. Everyone has different requirements
Yeah. For example USCC has had a total 10 year return of 8.3% per year. Something like a VFV. Which isn’t quite the same but very similar that tracks the SPY has had a total return of just over 14% in the same time frame.
I actively manage my portfolio doing the wheel strategy (Cash Secured Puts, Covered Calls) but it'd be nice to have a covered call ETF where you get monthly returns, sort of like a set it and forget it kind of thing. Of course Dollar Cost Average is very important for such positions!
I'd like to hear about the risks Adrian! I am contemplating selling off some real estate and redirecting the funds into covered call etfs so I am trying to learn everything that I can. I also am unsure on how the covered call etfs perform if the market tanks.
Most of us already know what you saying. We as baby investors use it on 10-20% as a cash flow tool rather than ITR machine over time. Index ETFs are doin that pretty well on 40% of a decent Core Staellite portfolios.
Thanks Adriano! You’re the best & this is very well explained I think there will always be ppl that enjoy calling us down for doing a different investment style then they are
Can you clarify or do a video. If an ETF rights CC’s on 30% of underlying…does that not mean it captures 70% of the underlying over the long term upside ( or downside)
yes but another factor is the moneyness of the calls. its might be 30% coverage but if the calls are "OTM" you capture more than 70% in this case. if they do 30% ATM calls then Yes you capture exactly 70% upside
Can you address the NAV erosion as well? For example assuming no new funds come into QQQY and they have multiple losing sessions. Sure they'll still pay the promised yield but the pool of cash to do cash secured puts on gets smaller. How does this scenario not cause QQQY to eventually go to $0? Sorry if you've already covered this elsewhere
@@PassiveIncomeInvesting thanks I watched a few videos of yours regarding this, and from what I gathered, the payout can sometimes include the NAV along with premiums collected (assuming the prems collected isn't enough). So that's fine, but the question remains, if they continue to payout a portion of NAV wouldn't consecutive losing sessions eventually deplete the cash reserves? Assuming no new inflows for the CC ETF.
Thanks for your contributions Adriano. Can you develop around the conditions that would make a synhtetic covered call etf viable (or unviable) for long term, for instance 5 or 10 years from its inception date?
Great video. I am about to retire and my priority is generating income. That is why I really liked the video for your Dad's RRIF and hope you will do updates on this. I have done my long term investing and I think the Covered Call ETFs will work well for me. I also have a few individual stocks and some 5 year 5.2% GICs. that will pay annualy.
Your strategy works my friend, for what it is intended to do. Some people just don't get it, and they never will. Just like some people think St Viator is the best, even though we know Fairmont rules!
i am not an income investor BUT i do have some yield etfsive learned from you and thanks for that. i like having the monthly income and love to reallocate that to other non yield long term growth stocks and etfs. i dont understand why peoplr are so polarized about this topic or style? doesnt need to be all in and otherwise its dumb. lots to learn from all financial youtubers...
I am really intrigued by the income investing and covered call strategy, however I feel a little late to the party in regards to investing in general, so it's hard to not want to chase maximum return. My plan as it stands is to go heavy into a growth index strategy in the short term and start to dip my toes into CC's at the same time. I may shift my portfolios focus over time, depending on how it makes me feel. - not necessarily sell anything major, just adjust where my ongoing contributions end up.
with an IRA having contribution limits, covered call etfs and Reits maybe the only real options to maintain purchasing power. ROTH IRA accounts even have a contribution cutoff after reaching a specific annual income.
Good info . Question, though- what’s your take on investing in index funds and withdrawing money for a fire lifestyle, versus covered call income funds? I know the downside to the latter is you have to take money out during market lows, but on the flipside, you also take money out when the markets up. Maybe a video on this would be good also, as these are the 2 main strategies that retirement people struggle with
So if people are talking about CC ETFs helping them retire early.. would it not allow them to retire EVEN sooner if they just buy the underlyings, let it grow quicker and then move that entire portfolio over to the PII / CC ETF strategy when the income is needed? Their income would be higher with this strategy, no? i think we're all addicted to seeing that monthly div income grow, even if all we're doing is reinvesting those dividends.
yes you can do that and it will PROBABLY be the case. but some complications might arise: like if the market is down when you want to do the switch. "when do you sell" is alot harder than it sounds sometimes.
Great video… thanks for your honest opinion… I personally use covered call etfs to generate income the only difference is that it’s only 30% of my portfolio …big part of my portfolio has no dividends at all … hope this helps…thanks
what are your thoughts on BLV? Im buying it monthly to add income to my emergency fund. i dont understand stuff like TLTW or JEPQ so I haven't invested in them. I would like a higher yield to compound faster but I'm not sure a safe way to get it
I think the only risk of CC is underlying underperformance w/c I'm happy to forego for monthly income specially when I retire and travel. How about leverage, what's the honest truth about it?
I don’t see what the controversy is. If you don’t want to be an income investor,then don’t be an income investor. Covered call etfs are what they are and they do what they’re supposed to do. Don’t invest in them if you don’t need the income. No big deal🤷🏻♂️
I've been investigating in these cc ETFs for two years. I just went over the numbers and total profit over 2 years was 8000. That's with dividends reinvested. All the draw downs of the cc ETFs (-21000) ate up my profits. Would like to see actual data here as the math tells the real story. You can be making great dividends every month yet the ETF keeps losing money. If it stayed flat it would be fine but if it keeps dropping what's the point? It's like they are giving you back all the money you put into it slowly and taking some away also.
My point here is over my 2 years with this strategy I made 29k and lost 21k, so technically made 4k a year. You need to look at your losses also even if its on paper and not realized. Can't be blind to just the dividends.
Also what I like about covered call etfs. They are hard to overpay for them cause they run at their NAV. Where stocks can trade up and over 400 to 500 times what their worth based on growth estimates. So you dont get caught eating a 100 to 300 or more drop ( like what happened with cathy woods stock etf)
Peace of Mind is an underrated aspect of income investing. I don't have to stress over when to buy or when to sell a stock. No regretting missed opportunities and no anxiety over underperforming assets I placed more faith in than I'll publicly admit. The money goes in, and I just chill.
Downside protection is very limited, max draw down of ZWB covered call is higher than the non covered call ZEB. Return is 25% less with no downside protection.
@@dividenddepotI crunched some numbers on the two tickers you cited, comparing same-date prices and how they went up/down, and found there's very little difference between the two. Even ZEB's price appreciation isn't particularly notable, considering ZWB's dividend payouts are roughly 50% higher.
I am interested in the monthly cash flow. Early retirement and quality of life beats total return any day. Thanks for another video.
I really dont understand how anything beats total return... maybe I am misunderstanding you, but if you look at something simple like ZWB covered called banks, and ZEB straight up bank etf... ZEB wins over long term... you can create your own dividend by just selling some shares slowly... either that or your money is gone in a few years.. Look at HMAX, pays 15% but is down 17% in a year... Thats horrible !! plug your numbers into portfoliovisualizer and see for yourself.. total returns are the best... I would rather get a stock that grows 15% a year and take out 10% and still have some growth than buy something that pays 15% and end up down 17% like hmax..
You could lose 25% of your starting asset value. Are you prepared for that?
@Steiner
Go Troll somewhere else...
Were you prepared for that?
Im too old to worry about total return!
I need passive income for life and my retirement.
Could be your number at anytime.
Never say too old to worry. We are going to live for ever. Wish you many more years of happy and health with a lot of love and passive income. Good luck 🤞
@@itayyahel you too 👍
@@itayyahel Live forever hahahhahahahahhahahhahaha. Mamma mia. No, everyone must say to themselves that they will not live forever, early in life. You will drop dead just like that fly, or bee, or donkey or snake drops dead and will become a meat for earth. Simple as that.
My sentiment exactly.
Use the hybrid strategy of covered call etfs and growth etfs/stocks. When growth etfs are on sale near moving averages or below, use the dividends of covered call etfs to buy growth etfs (DCA) and sell when in 10-30% profit and put back in dividend etfs/stocks. Rinse and repeat. NFA
I keep a third of my portfolio in growth stocks/ETFs to cover the missing upside on the 2/3 of the portfolio in income CC ETFs.
CC ETFs have been great. DCA every month = Increased monthly Dividends
Your vid’s have changed my life for the better.
keep collecting that rent! :) thanks !
Thanks for your opinion and your explanation, very well done. I just invested in a covered call etf for income. I definitely am interested in the downside risks 😊Because of this video I am now a subscriber 😊
Glad it was helpful!
My passive income was 13.5% of my initial outlay in 2023. Thanks to you Man!
I like this kind of videos,just talking. Feels like a podcast ( i miss the fact that you uses to invite guests )
Did PII for one year to supplement my 6 months holidays in Europe for some extra cash. This strategy worked well for me at that specific moment of my life. By hey, you need a lot invested otherwise not worth it. Try you gonna see whar i mean by that .
Moved back to growth. My huuuuge unrealised growth, which gives me a big smile whenever i check my portofolio every 2 weeks when buying more shares.
All strategies are good. There is no best way of doing... Best is what best for You ? In a specific time of your life and your goals. And nothing is stopping you doing a mix of many strategies.
Investing is fun ! Good luck and enjoy. Good luck to y'all.
Hi, good video, you are right for the long term. I used to build my own portfolio, using software and python programs to choose my stocks and optimize my portfolio. In doing that I learned not to keep loosers and take my profit when they get to my target. The advantage I see with CC ETF is that I don't have to sit in face of my computer from 9:30 to 16:00 each trading day! I am targeting high yield and I sell if the etf is not performing well. Up to now, I am not loosing too much, less than 1% total return and the distribution are more than enough for my needs. I think it is a good thing to rebalance or switch from one etf to another more often than not. I look forward to see the next on risk! That is not an easy part with those ETF....because the lack of information! Continue your good job. 😄
glad to see you figured out a plan that works best for YOU J!
DCA'ing every month and not trying to outperform the S&P, I'm trying to replace my 9-5 paycheck and then some!
Bro thank you :). Lot of respect and love to you and Erica :). Always thankful I found you :). I am generating income out of my Covered calls to replace my active income.
It's all about how you want your money back...monthly as a dividend NOW or a lump sum when you sell (roughly) LATER. I kinda like a mix, but I want a dividend on everything.
Exactly! I'll take guaranteed income monthly versus UNREALISED (not-guaranteed) income sometime in the future.
Thank you Adrian! Very informative and clear explanation. I recently learned that if you live in Ontario or BC you can have $50K CAD income paying 0 or very little income tax if your income comes from eligible dividends. Would be nice to know your opinion on the subject and what ETFs have a good eligible dividends and low downside risk. I hardly can find any info on if an ETF's dividends are eligible. Would be nice if you share where you search for such info. I am about to retire and still need to grow my accounts but then I will switch to income generating strategies. Idea of getting 100K+ (for couple) while paying little or no tax is attractive to me. Thanks for all you do for us. Appreciated!
Check each funds' website for the tax treatment. I struggle with this as well as I want those E div's. Most of the etf's are a combo of E div's, capital gains and ROC but the E div's portion usually low however several split share funds - class A and preferreds pay out majority in E div's.
The fund sheets usually show the tax distribution
already done
ruclips.net/video/UbjO7cZPhOY/видео.html
Check is the distibutions are ROC or dividends. And get an accountant, a corporate accountant so you know he's good.
I used your recommendations and I'm up, up up because of dividends. Markets have been flat for over 2 years with mutual funds.👍
Got out of mutual funds last year as I started to learn more and do my own investing. MFs the fees are too high and the returns to average in my opinion plus I enjoy managing a portfolio!
I was debating MF's with my advisor, who is also my friend about the real value of the 2% fee. The best comprimise we could really come to is that your paying it to attempt to remove volatility. One will never beat the market, regardless of what fee you pay @@Dividend-Shark90
Mutual funds are so bad! ETFs are KING
I have been using CC Etfs for years, I still have mixed emotions over total vs CC returns. In my mind, I catergorize the two for different purposes. I am retired, I need the monthly income, but I still need modest growth.
Would love your thoughts on this. If the underlying always outperforms the covered call ETF in the long term, do you think this tactic will work: Say you have $100,000 to invest. Instead of investing in QQQY you invest in QQQ BUT see how much QQQY pays each month and sell that amount of your QQQ position to pay yourself a "monthly dividend" no matter if QQQ is down or up. Do you think you would run out of money here or end up outperforming the covered call ETF?
What do you think? I would love to see this back-tested.
Not a good idea. You would decrease your share count. With income etf’s your share count stays the same or goes up if you reinvest the income generated each month. You would run out of money
In this case you have to be good in picking top and bottoms. Not many people can do this.
the covered call fund will have days when they generated money for free because the calls expired out of the money and you will just be burning money to keep up the with the payout on those days
it won't work IMO
@@PassiveIncomeInvesting I suspect the same but I am not fully sure why. I tried backtesting and of course total returns means the non income fund outperforms. But I am guessing in extended flat or bear markets I will bleed my capital doing it this way since those are the times the covered call ETF outperforms.
Great explanation. Simple and straight to the point about the 'pros' & 'cons' of Covered Call. Is there a video already that describes differences between leverage & cover calls?
those are 2 completely different things. leverage is typically just borrowed money to get more exposure to something
You have always said, and are very clear that covered call etfs, is about income. I have listened to some of the other advice. It’s aimed at long term investors. For me, I want the income. As I get older, I can later go into the principle. We don’t live forever.
Agree 100% with what you stated. However, an additional factor which ties directly into the defensive aspect of what you stated is peace of mind and not needing to be overly concerned when see the value of your fund drop dramatically, like a lot of them have during the recent/current bear market (no idea if it is over now or not). When are getting very little yield then all of your returns are on paper and only realized when you sell, so you only get maximum total return when you sell at the top of a Bull market, but who knows when that will be? Until I switched to this income strategy I was constantly stressing about my stock based investments. No more. Thanks so much for teaching me about this strategy through your channel.
exactly
Once again, clear, concise and honest. Thank you !
Would absolutely appreciate a video on risk with cc etfs thanks Adrien
there already is one where he weighs pros and the cons CC ETF isnt for everyone but if your all about income its your best bet
Right now I focus on div income and growth. If growth is doing well, I'll trim and invest those funds into div income. As I get older, ultimate growth is less important as time plays a factor (trying to gauge properly with market ups and downs). Because of the time factor I'm realistic about stock choices that might require several years to reach full potential. So, the growth aspect for me will become less important with time. I'd be super interested in a segment about CC ETF risks.
Thank you, Adrian, for all the videos. love the cash flow with this style of investing.
I buy AIPI (and some other high yeild) and use the income to buy other cc ETF's. Don't buy US cc ETFs in your TFSA, you wont get the 15% witholding tax back. I also use the tradingdview dividend adjust chart to see the actual (this chart does not re-invest, it just takes away the gap down when dist. are paid) . In a slow grind bull market, these ETFs are killing it. Making more than the underlying. CC ETFs on the US exchange in an RRSP are great. I own cc ETF on TSX in my non-registered accounts. I use the income to buy dividend stocks. I still feel that I'm missing some important info or relaization...
I like the covered call ETFs , when figuring Total return the part people forget is if you need the income, you would need to sell x number of shares each month to meet that income. so after 5 years you would not own as many shares, so even if the stock went up you do not capture all that gain, so I feel the return my be a lot closer then people think, but only in that situation. What is your thought?
I use cover call ETFs and at the moment I keep reinvesting the income in more covered call ETFs. Thus far the overall value of my portfolio keeps growing as is the income. It is the reinvested income that translates into overall growth. I enjoy your channel. You never pretended to be preaching gospel and as an investor it is my responsibility to exercise due diligence.
I agree 💯 with this. I reinvest all my dividends and consider this the "growth" of the etf. Almost at the point where I am buying a full share every month with the dividends. I have only been investing for less than 6 months, but I have done a lot of research. The covered call etf strategy is exactly what I was looking for. I will let my investments snowball, and hopefully be financially independent within 10 years.
@@naturalbornnerd3430 Keep it up sir. At the moment I am buying over 100 shares a month, depending on price of course.
@@naturalbornnerd3430 what funds are you in, mind sharing?
I hold a few cc ETFs due to Adrian’s guidance but have pivoted to focus more on total return. Everyone has to find what works for them.
Before I started buying CC ETFs I did CC on Spy and single stocks. I outperformed the underline in total return for months. So you could outperform but your income would be lower because many times you would have to write OTM (from 5 to 10%) so shares wouldn't get called away. It's really the income part that sets these etfs apart from a Total return perspective.
Hi, I’ve only looked at QYLD, and it has consistently produced 1% return per month which is way higher than the total returns on a regular ETF.
Are you saying that if the market becomes bullish, that 1% will vanish?
Lol no. I have qyld... that is not my experience
Great informative video! I recently just started swapping my stocks to CC ETFs and I can say my income is pretty impressive from where I was. Being close to retirement the more money I make the better. Thankful to have found this channel!
If we can see in their prospectus in what products these ETF invest, and what they do, why don't we do it our self? Because if we do the same Cov. Call Strategies in the same products, we get the same result and more money, because we don't pay them fees. I maybe miss something, right? Thanks very much for your educational videos.👍
Thanks for smart response to the negative people about CC ETF. I have two CC ETF (CRF). Can I ask you why you sold your CRF? Did you see any negative issues with them?
never had CRF. did you mean CLM? if so, see my last CLM video. i explain it in detail
thanks for the explianation, definately looking for that consistancy
Hello sir.. Speaking about a bull market, if CC ETFs have a limited upside, would the inverse of a CC capture all the upside with the risk being on the downside?
What if I am looking to use the efts to pay bills and to help build my over all portfolio and reach FIRE OR barista FIRE
I take a position and buy an equal position on the ex date when it drops, then sell one position when it recovers.
Thanks for your honesty. A perfect example is JEPI that outperformed in 2022 and underperformed in 2023. But I consider it a hedge to downsides in my portfolio.
exactly
I use CC ETFs in my IRAs to pump up other assets. I evaluate for NAV erosion monthly, and put the dividends in the most favorable location at that time.I do not plan to withdraw anything for 5 years.
Hi passive income investment, what about qdte vs qqq? Qqq will still outperform long term? Or xdte vs spy? Assume all dividends reinvested. Qdte and xdte is still new funds.
QQQ and QQQM will always outperform long term
I think the popularity of CC ETFs is because the US market prioritises capital appreciation over income and there's increasing demand for the latter. The UK market by comparison is somewhat "widows and orphans" these days - much more dividend focused. It's a very American way of doing things - don't change corporate culture, invent a new industry.
I'd say they're a good automatic hybrid alternative to drawdown later in life. But of course younger people may want holidays today rather than a holiday home when they're much older, which is fine. (Pros use calls and puts as a controlled way to exit and enter positions, which is actually their intended function.)
My favourite investment youtuber.
Me too.
I am FIRE since january 2024 with cover call ETF and split-corp. 42 years old and I do not work EVER guys. People planning FIRE based on the 4% yield rule. I have 14% yield with CC ETF. This video confort my decision. Thanks Adrian.
Don't make long term plans based on 14% annual income. To be safe use the 4% rule. At 42 years old, you will see a lot of unexpected things happen for the next 42 years and beyond.
you are welcome. but will you not make anymore money now? where is your entrepreneurial spirit?
@@PassiveIncomeInvesting The old monkey once said : Focus on the FI not the RE. I am currently reorganizing my life toward a better and more human life. FIRE in an adventure, not a retirement.
Just thinking out loud, if CC ETFs proliferate, won't it increase the supply of calls in the market and drive down premiums?
Will be turning 60 soon, would like to invest in USCL or USCC for income what are the down sides?
SP500.... have you ever heard of anybody not doing well investing it the SP500?
The S&P 500 Index,, delivered its worst ten-year return of -3% a year over the ten years ending in February 2009.
I really appreciate your clear & concise explanation of covered calls. I am in the accumulation stage at the moment but will pivot to passive income investing when it’s time to pull the parachute. Thanks for all the great content.
A better defense than selling calls is buying puts. If the shares go up you only miss out on what you paid for the puts. If the shares go down the puts will be worth whatever the difference in your strike and the price of the shares at expiration. A covered call can only protect the amount of downside equal to the premium you receive and it takes all the upside above your strike price.
If the stock(s) for that covered call goes, doesn't the value of the covered call go up too? For example, YTLS owns actual shares of TSLA. So, if the price of TSLA goes up, you might get less return perhaps but the value of YTSL should appreciate as well. You bought YTSL at round $14.xx and it went all the way up to $30+ as the price of TSLA went up. So, it is positively correlated with price of TSLA stock.
If the stock goes up too fast, it is more likely to reach the strike price of the covered call contract. As such, the shares committed to the covered call must be sold at the strike price to the holder of the covered call. As a result, the fund can no longer achieve any growth from the shares it lost if the stock continues to appreciate. That's why covered calls limit the upside of a rising stock.
Of course, there is no risk of losing the shares if the stock price declines or stays flat. In all cases, the fund benefits from the premiums it collects from selling covered call contracts.
yes of course it will, but how much depends on the CC Strategy. The more aggressive it is, the more income you get but the more UPSIDE you give up
@@dkyrtata6688 Can I do that myself, covered calls? It appears you can't lose. Better to learn it than invest in covered call ETF.
Premise behind income investing:
‘A Bird in the Hand is Worth Two in the Bush'
If we ever get another decade like the 1970’s, income investing will dominate.
yes , it will . they perform well if markets are flat.
Thoughts on yieldmax funds like amdy, etc. Thanks.
Excellent explanation 👌
Thank you 🙂
I don't "need" more money in my retirement - I just like having $$$$$$ dividends reinvested back. But I get that some people "need" total return. Also nothing wrong with a balanced or mixed approach - that works too. Great video as always.
Well said!
Would love to see a vid about the risks of covered call etfs.
Thanks for the explanation, Adrian. Since I'm still learning about investments, I believe the covered calls are great for me to have less volatility and still be able to use the dividends to invest in other products, for example. Thank you.
Good video. Someone who’s already well allocated to long term appreciation in other assets and simply needs 1) cash flow and 2) damped downside risk… perfect solution imo. Everyone has different requirements
Well said!
Hey Adrian do you mean the cc total return is less even including the dividend you received ?
Yes
Yeah.
For example USCC has had a total 10 year return of 8.3% per year.
Something like a VFV. Which isn’t quite the same but very similar that tracks the SPY has had a total return of just over 14% in the same time frame.
yes (long term)
I actively manage my portfolio doing the wheel strategy (Cash Secured Puts, Covered Calls) but it'd be nice to have a covered call ETF where you get monthly returns, sort of like a set it and forget it kind of thing. Of course Dollar Cost Average is very important for such positions!
I'd like to hear about the risks Adrian! I am contemplating selling off some real estate and redirecting the funds into covered call etfs so I am trying to learn everything that I can. I also am unsure on how the covered call etfs perform if the market tanks.
The covered call ETF's perform just as poorly if the market tanks, your maximum draw down will be the same in most cases.
Most of us already know what you saying. We as baby investors use it on 10-20% as a cash flow tool rather than ITR machine over time. Index ETFs are doin that pretty well on 40% of a decent Core Staellite portfolios.
Thanks Adriano! You’re the best & this is very well explained
I think there will always be ppl that enjoy calling us down for doing a different investment style then they are
So with this analysis, why not go yieldmax type investments all day long with 20% range returns? Thats my plan BTW
Can you clarify or do a video. If an ETF rights CC’s on 30% of underlying…does that not
mean it captures 70% of the underlying over the long term upside ( or downside)
My understanding is that yes, it will capture 70% of the under-lying's upside. But as always 100% of the downside.
yes but another factor is the moneyness of the calls. its might be 30% coverage but if the calls are "OTM" you capture more than 70% in this case. if they do 30% ATM calls then Yes you capture exactly 70% upside
Well done. Thanks Adrian. Yes, I'd like to see another video on the risks of cc's also.
As always great video to the point and full of good informed information and data.
Can you address the NAV erosion as well? For example assuming no new funds come into QQQY and they have multiple losing sessions. Sure they'll still pay the promised yield but the pool of cash to do cash secured puts on gets smaller.
How does this scenario not cause QQQY to eventually go to $0? Sorry if you've already covered this elsewhere
Already did . Search my videos
@@PassiveIncomeInvesting thanks I watched a few videos of yours regarding this, and from what I gathered, the payout can sometimes include the NAV along with premiums collected (assuming the prems collected isn't enough).
So that's fine, but the question remains, if they continue to payout a portion of NAV wouldn't consecutive losing sessions eventually deplete the cash reserves? Assuming no new inflows for the CC ETF.
Finally, someone who tells it like it is. More investors need to hear and understand this video.
Thanks for your contributions Adriano. Can you develop around the conditions that would make a synhtetic covered call etf viable (or unviable) for long term, for instance 5 or 10 years from its inception date?
Hey Adrian Can you please do a video on Covered Call risks, Thanks 👍
he just did.
Noted. will be a shorter video than this. that's for sure!
Great video. I am about to retire and my priority is generating income. That is why I really liked the video for your Dad's RRIF and hope you will do updates on this. I have done my long term investing and I think the Covered Call ETFs will work well for me. I also have a few individual stocks and some 5 year 5.2% GICs. that will pay annualy.
Very good job driving your point across for those uneducated 😅
Biglove brother. One of your best videos.
Your strategy works my friend, for what it is intended to do. Some people just don't get it, and they never will. Just like some people think St Viator is the best, even though we know Fairmont rules!
lol only Montrealers will get this!
i am not an income investor BUT i do have some yield etfsive learned from you and thanks for that. i like having the monthly income and love to reallocate that to other non yield long term growth stocks and etfs. i dont understand why peoplr are so polarized about this topic or style? doesnt need to be all in and otherwise its dumb. lots to learn from all financial youtubers...
I am really intrigued by the income investing and covered call strategy, however I feel a little late to the party in regards to investing in general, so it's hard to not want to chase maximum return. My plan as it stands is to go heavy into a growth index strategy in the short term and start to dip my toes into CC's at the same time. I may shift my portfolios focus over time, depending on how it makes me feel. - not necessarily sell anything major, just adjust where my ongoing contributions end up.
sounds like a good plan to me!
with an IRA having contribution limits, covered call etfs and Reits maybe the only real options to maintain purchasing power. ROTH IRA accounts even have a contribution cutoff after reaching a specific annual income.
If considering the monthly dividend to reinvest, would that outperform in long run？
No it would not. Total return will always be less over the long term.
You will still be making money overall just not as much as growth investing.
no, that's included in the performance you see on the funds websites
Good info . Question, though- what’s your take on investing in index funds and withdrawing money for a fire lifestyle, versus covered call income funds?
I know the downside to the latter is you have to take money out during market lows, but on the flipside, you also take money out when the markets up.
Maybe a video on this would be good also, as these are the 2 main strategies that retirement people struggle with
Great suggestion!
Thats why i like the hybrid approach 50% cc etf and 50% growth stocks. Good idea ? Any suggestions?
I like how you broke this down Adrian ;-)
Banana bread put option
So if people are talking about CC ETFs helping them retire early.. would it not allow them to retire EVEN sooner if they just buy the underlyings, let it grow quicker and then move that entire portfolio over to the PII / CC ETF strategy when the income is needed? Their income would be higher with this strategy, no? i think we're all addicted to seeing that monthly div income grow, even if all we're doing is reinvesting those dividends.
yes you can do that and it will PROBABLY be the case. but some complications might arise: like if the market is down when you want to do the switch. "when do you sell" is alot harder than it sounds sometimes.
A risks video on CCs would be great!
Do not put bananas and cucumbers on a pizza! Hilarious Adrian - loving your videos and PII!
Great video… thanks for your honest opinion… I personally use covered call etfs to generate income the only difference is that it’s only 30% of my portfolio …big part of my portfolio has no dividends at all … hope this helps…thanks
what are your thoughts on BLV? Im buying it monthly to add income to my emergency fund. i dont understand stuff like TLTW or JEPQ so I haven't invested in them. I would like a higher yield to compound faster but I'm not sure a safe way to get it
That was awesome! Thank you!
Any fee below 1% is a deal compared to the 2.5% we used to pay in crappy Mutual Funds!!
I think the only risk of CC is underlying underperformance w/c I'm happy to forego for monthly income specially when I retire and travel. How about leverage, what's the honest truth about it?
lol everyone wants the Honest Truth about everything
Yes please , go for it video on risks of covered call ETFs
ruclips.net/video/vDLFwQwG_8g/видео.html
Does JEPQ and JEPI are example of CC etfs?
yes
I don’t see what the controversy is. If you don’t want to be an income investor,then don’t be an income investor. Covered call etfs are what they are and they do what they’re supposed to do. Don’t invest in them if you don’t need the income. No big deal🤷🏻♂️
humans are attracted to controversy i guess.
thx for your honesty
I would be very interested in. A video on the risk about cover call. Adriano.
All your info as been very helpful all around thanks
I always say once the income from Covered calls is in I can invest into more growth Assets like Real estate or do something . :)
Why do you buy them then if you know they’re trash? (Which they objectively are)
Great video, thank you ! Can you please explain us how covered call & leverage can help us with long - term investing strategy ?
I've been investigating in these cc ETFs for two years. I just went over the numbers and total profit over 2 years was 8000. That's with dividends reinvested. All the draw downs of the cc ETFs (-21000) ate up my profits. Would like to see actual data here as the math tells the real story. You can be making great dividends every month yet the ETF keeps losing money. If it stayed flat it would be fine but if it keeps dropping what's the point? It's like they are giving you back all the money you put into it slowly and taking some away also.
The point where Adrian ignores is that you still need to look at the overall NAV of the etf despite the high yield
Income is the point. Becoming Financially Free is the point . Freedom is the point. Less Volatility is the Point. Max Total Return is NOT the point.
I agree, you cant be blind to just the dividend yield and not consider the NAV. @@johnnychan870
My point here is over my 2 years with this strategy I made 29k and lost 21k, so technically made 4k a year. You need to look at your losses also even if its on paper and not realized. Can't be blind to just the dividends.
Nice, honest video, thanks
Thank you for this video Adrian :)
cash flow is key to CC etfs
also with total return you need to sell units to for retirement
Also what I like about covered call etfs. They are hard to overpay for them cause they run at their NAV. Where stocks can trade up and over 400 to 500 times what their worth based on growth estimates. So you dont get caught eating a 100 to 300 or more drop ( like what happened with cathy woods stock etf)
6:12 you can reduce volatility more tax efficiently and cheaper by buying bonds
Peace of Mind is an underrated aspect of income investing. I don't have to stress over when to buy or when to sell a stock. No regretting missed opportunities and no anxiety over underperforming assets I placed more faith in than I'll publicly admit. The money goes in, and I just chill.
Downside protection is very limited, max draw down of ZWB covered call is higher than the non covered call ZEB. Return is 25% less with no downside protection.
@@dividenddepotI crunched some numbers on the two tickers you cited, comparing same-date prices and how they went up/down, and found there's very little difference between the two. Even ZEB's price appreciation isn't particularly notable, considering ZWB's dividend payouts are roughly 50% higher.