Income investing has been around for decades, but the recent rise in popularity of covered-call funds has brought a lot more attention to the space. For many investors who are newer to income investing, covered-call funds have become almost synonymous with income investing itself. In the U.S., we have started to see far more variations of funds using derivatives to generate cash flow. You have everything from traditional covered calls and cash-secured puts to spreads and other more complex option strategies. Canada is still lagging behind somewhat when it comes to the variety of derivative-based income products available, although Canadians can choose to buy U.S.-listed funds. I’m curious how many people here are primarily using covered-call funds versus holding other types of income-producing assets as well. Things like REITs, bonds, dividend-paying companies, or other assets that naturally generate cash flow from their underlying operations rather than manufacturing a large distribution through derivatives. Do you diversify where your income comes from, or is most of your portfolio income generated through covered calls?
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CoderDonna @coderdonna · 1hEdited
I'm keeping $ARCC and $VICI (over a year+) but I just sold out of $OBDC (was also a long-term investment) today. They started chipping the dividend. 👎 BDCs and REITs in particular are definitely under scrutiny right now. That said...some are always going to get the benefit of the doubt with me. I've held $HOOD for a long time (obviously, it hasn't been in the $20s in forever!) but I'm thinking of trimming to continue my dividend kings and sector rebalancing.
Clantosa @clantosa · 15mEdited
I really like the idea of REITs but I've been in and out of $ZRE several times and can't decide if I want it or not.. I hate the 0.6% MER and the price chart has done nothing so all of my return is coming from the distributions I don't use GICs yet as I have no use for them right now but at some point I'll have a GIC ladder I do have dividend paying stocks in the form of $XEI and $SCHD these are 2 core holdings I'm planning to keep forever I also like the idea of my infrastructure ETFs $CIF and $BN. Brookfield is getting hammered right now and man what a volatile stock with a beta of close to 2 but I like the idea of infrastructure as a debasement strategy since it produces continuous cash flow from hard assets I did have $SPLT I like preferred shares but SPLT is trading as a premium and so is many preferred shares so I got out. Maybe in the future I'll look into it again but I'm no longer going to pay a premium for them
Jason @retiredjay · 50m
I hold a variety of income producing ETFs and stock. Covered call ETFs both higher yield ($TSPY) and lower yield ($DIVO) Put spread ETFs ($OVL and $OVS) REITs ($VICI) BDCs ($PBDC) CEFs ($ADX$FOF$UTG)
CoderDonna @coderdonna · 2h
I stay away from derivatives, since I hear bad things about NAV erosion (I know about the dip when dividends are paid, but it's not really the same thing), and I don't truly understand how derivatives work well enough to feel comfortable with them. That said - if you know what you're doing and can keep your fingers on the pulse - a lot of people really like them! I'm just paranoid about capital escaping.
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