What Is a Monthly Income ETF?
Monthly income ETFs aim to pay investors cash distributions every month. Many use covered‑call overlays on dividend‑paying stocks to generate additional option income, which can boost yield but may limit upside.
Pros & Cons (At a Glance)
| Pros | Cons |
|---|---|
| Regular monthly cash flow | Upside may be capped due to covered calls |
| Simple access to diversified holdings | Payouts fluctuate with markets & premiums |
| Convenient for retirement income planning | Tax character of distributions can vary |
What to Watch Before You Buy
- Holdings & Sector Mix: Bank‑heavy vs diversified matters for risk.
- Distribution Policy: Trailing yield vs target payout; understand how it’s calculated.
- Fees: Higher fees can drag on long‑term total return.
- Tax Treatment: Eligible dividends, ROC, or capital gains — account type matters.
Where ZWB Fits
ZWB (BMO Covered Call Canadian Banks ETF) focuses specifically on Canadian banks with a covered‑call overlay. This can appeal to investors seeking monthly income and comfortable with bank concentration.
Next Steps
- Compare ZWB vs ZWC for diversification trade‑offs.
- Review your account type (TFSA, RRSP, non‑registered) and tax implications.
- Consider starting with a small position and monitoring payout consistency.