Investment Q&A

The general leverage comment typically references 2X and 3X leveraged ETFs, that use derivatives to achieve their fund goals. These derivatives are reset daily, and this causes a natural decay in NAV and these are typically horrible products for investors who are not just day trading. HDIF and others use 'some' leverage, as one would do in a margin account, and it is not 'derivative' leverage. In this case it uses 1.25X leverage. This will enhance returns in a good market and amplify losses in a bad market, but the amount of leverage is reasonable, and with covered call premiums as well we would consider acceptable. But investors need to understand what they are buying. HDIF sells covered calls on 33% of its portfolio, so there is still room for nice capital gains in a market rally. HUTE is similar but focuses on the utility sector. Fees are high due to the very active management strategy of the funds. We would expect total fees to decline 'a bit' as assets rise. Overall, for those that specifically want enhanced income, we are OK with these types of funds.