Q: Hi there. With the recent uncertainty in the markets, what is your opinion on HYLD.CA?
Does it make sense to be more diversified when deploying new money in this current environment and have a larger amount of investable capital in ETF type funds that pay higher yields- as opposed to individual names? Do you see the Canadian dollar gaining some strength as we head further into 2025?
Thank-you as always!
Does it make sense to be more diversified when deploying new money in this current environment and have a larger amount of investable capital in ETF type funds that pay higher yields- as opposed to individual names? Do you see the Canadian dollar gaining some strength as we head further into 2025?
Thank-you as always!
5i Research Answer:
With tariffs seemingly to start next week, and the US economy now in more jeopardy than before, it is hard to picture a strong Canadian dollar in the short term. HYLD uses leverage (25%) so it does enhance income (with covered calls) but it can also decline more in a downturn. In a bad market the covered call premiums will only help so much. For those seeking safety, an ETF does make some sense, but we would prefer a non-leveraged product such as ZWC for conservatism.