# High Yield Funds & ETFs



## Janus (Oct 23, 2013)

I'm mainly a stock investor, but for the time being I'm not allowed to buy any stocks due to my work. I am, however, allowed to buy Mutual Funds & ETFs.

What are everyone's favourite high-yielding funds & ETFs? I'm looking to keep it to equities or real estate (no HY bond funds). MERs are another issue, but I'll look into those later.

Cheers,

Janus


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## GoldStone (Mar 6, 2011)

Why the focus on high yield? Do you need the extra income? 

Or do you believe that high yield automatically leads to better total returns?

iShares Mortgage Real Estate Capped ETF (REM)
Yield: 15%
5 year price return: -6.6%
5 year total return (annualized): 3.4%

SPDR S&P 500 (SPY)
Yield: 2%
5 year price return: +103%
5 year total return (annualized): 9.9%

Which one would you rather own?


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## james4beach (Nov 15, 2012)

Janus, my bankster buddies all own the basic index ETFs ... IVV, XIU etc and they leave the junk products for the clients and gullible retirees to buy

Repeating goldstone's query, why the desire for high yield?

Apologies that I'm not being too helpful here as I don't really have any favourites. The closest I come to liking a high yielding ETF is with *ZUT and ZDV*, however, I think payout ratios in both of those are too high and I expect their prices will go lower as distributions get cut, so I am not buying them here (although they are on my watch list). I already own some ZUT but I would not buy more until it falls quite a bit from here


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## doctrine (Sep 30, 2011)

ZRE (real estate) has a 5.1% yield.


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## Janus (Oct 23, 2013)

Interesting comments. Goldstone, I definitely do NOT believe that higher yields = better total returns. I'm an SPY guy myself. 

james: the desire for high yield is just to do some research, in the future I'll be employing an income strategy and wanted to know what's out there product wise if I'm still restricted on buying stocks in the future. I'll check out those ETFs!

doctrine: Thanks, I'll look at that too.

I've actually made a mistake. My Canadian holdings will be relatively inaccessible for the next (long) while, so the yield is irrelevant (it'd be DRIPPED anyway).

Still curious to know what's out there in Canada though.

Edit: ZDV is a bit scary with so much in the energy sector. Like how it's not all utilities though.


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## andrewf (Mar 1, 2010)

Janus said:


> the yield is irrelevant


We have a winner!


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## Pluto (Sep 12, 2013)

I think you should consider xre under certain circumstances i.e. a lower price. I bought some back in 2008-9 for an average price of 7.5 and a yield of about 10 at that price. With the yield + capital gain it has outperformed xiu. However, since xre is a basket or reits, it doesn't have the long term potential of xiu. I'm gradually selling off the xre as I don't want to be holding it when the world comes to an end again. But in the event of another end of the world scenario, I'd consider buying it again.


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## humble_pie (Jun 7, 2009)

Janus said:


> I'm mainly a stock investor, but for the time being I'm not allowed to buy any stocks due to my work. I am, however, allowed to buy Mutual Funds & ETFs



oh, dear. You are only allowed to buy mutual funds & etfs? they are going to fall upon you like a pack of famished wolves. In this forum, you will never hear the end of why this etf is better than, or worse than, that nearly-identical etf.

you could goose them a little, though. The etfs, i mean, not their orthodox religious disciples.

for basic quality: buy XIU; along with government bonds it has the delightful property of being least likely to go bankrupt.

to boost yield: sell strangles on this etf, or similar structures on a couple of weaker cousins.

the cousins include XEG, XFN & XGD to a certain extent, for the minority that still devoutly believes in gold. In canada, no other etfs have decently liquid option markets. The first 3, particularly XIU, have decent option markets.

a reward is that these are ultra-low-maintenance no-brainer strategies. XIU less short options requires perhaps 100 minutes of attention per annum. That's less than 10 minutes per month. Only a few seconds per day.

all the more time for frisky microcaps, said grandmother wolf to little red riding hood.


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## james4beach (Nov 15, 2012)

humble_pie said:


> In this forum, you will never hear the end of why this etf is better than, or worse than, that nearly-identical etf.


lol we do seem to have a lot of those threads...

I think the broad Canadian index ETFs, XIU and ZCN, are about as good as it gets. I've made the argument before that ZCN could be called Canada's best "dividend fund"... at a yield of approx 2.8% after MER (and nearly entirely eligible dividends)

The ZCN/XIU yield is in the same ballpark as many dividend funds. So why not just go with the TSX index itself? Lowest MER you'll find


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## humble_pie (Jun 7, 2009)

james4beach said:


> I think the broad Canadian index ETFs, XIU and ZCN, are about as good as it gets


cannot use ZCN if one is writing options on a long etf holding. There is no option market in ZCN.

like i said, the only active etf option market in canada is XIU; to a lesser extent, XFN & XEG. These are where the institutions go. These are where the retail investor must follow.

in terms of option strategies, just about all the other canadian etf option markets are stranded high & dry on bare rock, at permanent low tide.

it's true that it might sometimes be possible to do an odd opening covered write here or there. But when it comes time to roll those options forward in time, there will be no market. There will be no counterparties. The only party willing to sell to you or buy from you will be the montreal exchange dealer himself. That's when those huge yawning spreads will open up, like treacherous little whirlpools.


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