🚫 Covered Call ETFs in Your 20s & 30s - not for me
I’m not against covered call ETFs — in fact, I think they’re brilliant in the right context. I’d happily put 20–25% of my portfolio in them… but not in my 20s or 30s. Here’s the problem: Covered call ETFs are designed to trade upside growth for extra income. You collect juicy premiums today, but you’re capping your long-term gains. And over decades, that compounding from growth is where the real wealth comes from. The math is simple: Long term, the underlying asset will almost always outperform its covered call version because you’re not selling off future gains piece by piece. Everyone’s situation is different, and no two strategies are the same. But for me, covered call ETFs make the most sense later in life — I’m talking in my 50s — when my focus will shift from max growth to max income. That’s when I’d use them inside my TFSA to pull out taxable income without touching my principal. Until then? I’ll let growth do the heavy lifting. Here’s a chart on Total returns of XYLD and VOO over the last 12 years. What do you guys think?
14K views
100 Comments
ramnath @luv2laaf · 1yr
100% agree with you when it comes to regular covered call etfs. But that is where relatively newer products that use leverage (not more that 25-30%) are able to perform way better than your $XYLD example. For instance check out $USCL compared to $VOO... USCL launched I believe in July 2023 so for the same time frame it has given a total return of approx 48.6% vs VOO of 47.8% assuming dividends are re-invested. Now let's assume you take the income and don't DRIP then USCL is still at 47.9% vs VOO of 47.1% So both are very close but Leveraged CC ETF give you the option of having income at the same time So it does come down to individual needs rather than age being a factor to determine choice of investing. With the right Leveraged CC ETF don't think it's a bad or wrong option anymore.
Robert M
@myliferetro · 1yr
😁 I'm only 40 and I'm financially free because of ETFs like hyld and others of high quality, I only work to get more money too put into my investments... The best feeling you can get is knowing you can quit your job and be just fine.
Adriano Starinieri
@adrian_pii · 1yr
Do voo vs YMAX or tspy or gpix . You chose the steam engine covered call etf to compare voo to hehe
Brett
@birdmanbrett · 1yr
I agree. However there is certain scenarios where covered call etfs can actually outperform index investing. Say for instance we get an extended bear market or sideways market. Covered calls will outperform. Therefore I don’t see a problem with a smaller allocation to a diversified covered call etf even in your 20’s and 30’s
See the full comment section 👀Sign up for the full Blossom experience!
