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Another category of high-yield ETF includes those utilizing covered call strategies to generate income from option premiums. These ETFs, while providing downside protection, can limit upside potential in bull markets. A notable example is the Q ETF, which, despite a yield of 12.6%, has shown substantial total returns, highlighting the divergence between income focus and growth potential.
Key Concepts: Net Asset Value (NAV) and Return of Capital (ROC)
Understanding NAV is essential for evaluating high-yield investments. NAV denotes the total value of a fund's holdings minus liabilities, divided by the number of outstanding shares. A declining NAV can indicate trouble, while a falling share price may signal unsustainable dividend payouts.