The stock market has been volatile in recent months, with many investors feeling uncertain about the future. In this environment, it can be difficult to know where to put your money. However, one investment that may be worth considering is the exchange traded fund (ETF) XYLD.
XYLD is a covered call ETF that invests in the Nasdaq-100 Index. Covered call ETFs sell call options on the underlying index, which generates income for the fund. This income is then distributed to shareholders in the form of dividends.
In a challenging market, XYLD can be a good way to generate income while still maintaining exposure to the stock market. The fund’s covered call strategy helps to protect against losses, while the dividends provide a steady stream of income.
Here are some of the reasons why XYLD may be a good investment in a challenging market:
- Income: XYLD pays a high dividend yield of 10.5%. This means that for every $100 invested in the fund, you will receive $10.50 in dividends each year.
- Protection: XYLD’s covered call strategy helps to protect against losses. When the stock market falls, the fund’s call options will expire worthless, which will help to limit losses.
- Exposure to the stock market: XYLD invests in the Nasdaq-100 Index, which is a broad index of large-cap technology stocks. This means that you will still be exposed to the stock market, even though you are investing in a covered call ETF.
If you are looking for an investment that can provide income and protection in a challenging market, XYLD is a good option to consider.
Here are some additional factors to consider when investing in XYLD:
- Expenses: XYLD has an expense ratio of 0.60%. This means that for every $10,000 invested in the fund, you will pay $60 in fees each year.
- Volatility: XYLD’s price can be volatile, as it is tied to the Nasdaq-100 Index. This means that your investment may experience significant swings in value.
- Taxes: Dividends are taxed at the same rate as ordinary income. This means that you will have to pay taxes on the dividends you receive from XYLD.
Overall, XYLD is a good investment for investors who are looking for income and protection in a challenging market. However, it is important to be aware of the risks involved before investing.