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BMO Covered Call Utilities ETF (ZWU)
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Brompton Enhanced Multi-Asset Income ETF (BMAX)
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Harvest Canadian Equity Enhanced Income Leaders ETF (HLFE)
Q: I hold a significant amount of those 3 ETF in my non registered account + RRSP.Assuming that ROC represents a large part of the dividend ( true?),I suppose that we could tolerate a "reasonable or slight" réduction of the NAV ,compensated by the much lower income tax + partial compensation of capital gain if eventually sold .Those advantages are not present in the RRSP , maybe should I reduce the % of covered call ETFs in the RRSP if the NAV is not stabilized... Please comment ( or criticize ! )my observations since I am far from being an expert, regards J-Y
5i Research Answer:
Last year, return of capital was 87% of BMAX's distribution allocation. HLFE 72%; ZWU is typically near 50% ROC annually. It is a complicated issue, and depends heavily on one's actual tax rate. But generally, with lower rates on capital gains for most investors, it is better to hold high-ROC funds outside of registered plans.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWU.