First Sector Leader investment - XYLD

Symbol: XYLD

Description: The Global X S&P 500 Covered Call ETF (XYLD) follows a “covered call” or “buy-write” strategy, in which the Fund buys the stocks in the S&P 500 Index and “writes” or “sells” corresponding call options on the same index. In times of market volatility (2022 and 2023 qualify), the sold call options can generate high rates of income for the share holder. There is less risk as well since the primary holdings are stocks in the broader S&P 500 index.

Current Price: $40.68

Dividend Yield: 11.92%

Performance: Up 1.88% over the past month

-Flat (-0.07%) over the past 3 months

- Up 2.26% over the past 6 months

- Up 3.3% YTD

Holdings: XYLD has a top 10 of AAPL (Apple), MSFT (Microsoft), AMZN (Amazon), NVDA (NVidia), GOOGL (Google), BRK.B (Warren Buffet’s Berkshire Hathaway), TSLA (Tesla), META (Facebook/Meta) & XOM (Exxon Mobile). The top 10 make up around 29% of the fund’s holdings, with the rest tracking with the S&P 500.

Opinion: XYLD is a great way to avoid the massive volatility we are seeing in the current market, in addition to a nice income generator. With dividends, you would be up over 5% if you bought in early January. This is a great way to get exposure to the S&P 500 with some income generation. You won’t get the full upside of the S&P, but you will get the 12% dividend independent of the market. Let’s say the S&P grows 8% this year (average), XYLD will probably only grow around 3-4%. However, when you add in the 12% dividend, this investment will end up at 15+% (almost double the S&P).

Personal investment: This is one of the 10% leaders in my portfolio. I don’t use dividend reinvestment, but instead look to add shares on down market days (S&P down 2+%) using my cash from dividends. This is one you could set on automatically reinvest as it won’t have the variability of other investments.

Summary: It benefits all portfolios to get some exposure to the broad market and the healthy 12% dividend qualifies for our portfolio goal (15%). XYLD is one of the first positions I created in my portfolio and you could make the argument for it to be over 10% given the quality of companies it holds. As I get more into the portfolio, there will be some higher yield investments with different risk profitles. So, it’s nice to have a safe, S&P tracked high yield investment for some balance.

Fund Link: S&P 500 Covered Call ETF (XYLD)