A reader recently asked if I considered HFIN since I hold HCAL in the corporate account. The short answer is no.
When I started the account, I was focused on keeping it all simple with the banks and covered calls. Covered calls can amplify your income but also your loss so I started slowly. Since then, all dividends are re-invested at a lower cost and generate new and higher yields.
The goal of the account is to generate a higher yield than the banks or life insurance stocks. With the interest rate change, it all changed the playing field so I started buying stocks instead of ETFs.
However, I did purchase HDIV later on which now holds HFIN so I do hold HFIN indirectly.
What Is HCAL ETF?
The HCAL ETF is simply holding the big 6 banks equally with a covered call strategy. You can find the details in the Hamilton ETF prospectus.
The volatility is similar to the banks and there are 3 performance levels with the banks as NA is usually the best followed by RY and TD, and then the others.
The big 6 banks are:
Covered calls help generate additional income which is a simple and effective strategy to boost income.
What Is HFIN ETF?
The HFIN ETF holds Canada’s 12 largest financial services companies equally with a covered call strategy just like HCAL.
The top 12 Canadian financial stocks are:
Some of the holdings aren’t stocks I would hold individually which often makes me stay away from ETFs. I think I would favour HMAX over HFIN based on the holdings as it drops BN and FFH but the covered call approach is different.
HCAL vs HFIN: The Winner Is?
The biggest difference is the dilution of your investments. When I bought HCAL, I knew I bought the banks and I knew the performance and volatility I would have from the stocks individually. What I did was pay someone else to do covered calls for me.
When you buy HFIN, you dilute everything. It’s the same rationale as buying one bank or buying an ETF. Are you investing with conviction in one stock? or are you investing to minimize the downside?
What sort of investor are you? Do you play offense or defence?
If you are in your 70s or 80s and depending on your health, your goals are very different than someone who is just retiring and planning to visit the world. The income needs are massively different. These days, GICs or real Bonds (not bonds ETF) might be appropriate.