Have you ever seen a ‘finfluencer’ (financial influencer) talk about a new ETF or stock and you’ve thought, “Hey, they’re successful, I’ll just copy them!”?
Or wondered about some investment you heard your brother-in-law mention over dinner?
Yes? Then this diary is for you.
Back when we started investing in 2020, that’s what we did.
We saw a guy on YouTube buy Canadian bank stocks, so that’s what we did. We bought Canadian bank stocks.
In 2021 when we switched to covered call ETF investing, we did the same thing.
But a few years in, we realized we only had a vague idea of what we were investing in.
I could tell you whether it was a tech ETF or a healthcare ETF… but that was about it.
I had no idea what was going on under the hood of the fund, and because of that, I had no idea what type of risk we were taking on.
We’ve made several investments that have lost us over multiple five figures because we didn’t actually know (or like!) what we invested in.
Over the past six years, we’ve learned about what we look for when it comes to funds we choose.
The biggest lesson? What you look for in a fund has more to do with you, your family’s future, your lifestyle, and your goals than anything else.
It’s probably why that clichéd saying rings true: personal finance is PERSONAL.
So while we’re still refining and understanding what WE look for when it comes to investing in covered call ETFs (our main source of income that allowed us to retire in our 30s), our current framework sits at 19 questions.
Nineteen questions we think through before we drop one dollar into a new fund.
I’ll start with a quick list of 19 questions, then give a bit more insight as to how we think through these questions in the subsequent section.
And of course, if you’re new to investing and some of what you’re about to read seems like a new language, that’s NORMAL! If you need something explained in further detail, leave your question in the comments.
Or take it to your favorite AI chat and have it explain the concepts simply.
This isn’t the be-all-end-all guide for picking funds, but it is what is working for us right now. I hope that by sharing it, it inspires you to set up your own criteria for choosing investments wisely.
Ready to dig in?
A quick note before we dive in: I’m not a financial advisor, and this isn’t financial advice. This is just our real, lived experience building this portfolio since 2020. The wins, the choices, and the reasoning behind them. Our fund selection was built carefully around our goals, our risk tolerance, and our timeline. Please don’t copy our portfolio. Do your own research, understand your own numbers, and build a strategy that actually fits your life. Our portfolio is also always evolving. What you see here today may look different six months from now.
Before I break each of these down, here they are in one place. Bookmark this, screenshot it, whatever works for you.
Goals
What do I actually want to invest in?
What’s this fund’s job (income, growth, dividend growth, or a mix)?
What’s my time horizon for this position?
Understanding the Fund
What does this fund actually hold?
How long has it been around, and does that matter to me here?
How is the covered call strategy actually structured?
Does it use leverage, and if so, how much, and am I okay with that?
What are the total fees (MER, trading expense ratio, and total ETF expenses) and do I understand why they're what they are?
Have I actually read the fund’s official info page?
Performance & Risk
What’s the current trend: up, down, or choppy?
How has it performed in past downturns?
Is the fund manager reputable, with a real track record?
Has this fund ever missed a distribution?
Are the distributions consistent, or do they swing around a lot?
The Income
How often does it pay: weekly, monthly, quarterly?
What’s the current yield, and does it look sustainable?
When’s the ex-dividend date, so I know when my first payment actually lands?
Portfolio Fit
Is my portfolio actually diversified (across sectors, fund managers, and within the fund itself)?
How does this compare to similar funds out there? Would something else do the job better?
That’s the whole list. Now let’s actually walk through why each of these matters.
Before I even look at a ticker, I ask myself three things.
What do I actually want to invest in?
Stocks, bonds, ETFs, indexes, REITs, a specific sector: the universe of options is huge. I narrow this down first because it changes everything else I look at.
A REIT is going to behave differently than a broad market ETF, which behaves differently than a single-sector covered call fund. If I skip this step, I end up comparing funds that were never actually competing for the same dollar in the first place.
What’s this fund’s job?
I think of every position as having a specific role. An income fund’s job is to pay me cash now, even if that means slower growth in the unit price itself. A growth fund’s job is to appreciate in value, even if it pays little or nothing along the way. A dividend growth fund sits in between: it pays a small dividend now, but the goal is for that fund to increase both its dividend and its value over time.
Naming the job upfront keeps me from judging a fund by the wrong measuring stick later (like getting disappointed that an income fund isn’t growing much in price, when growth was never its job).
What’s my time horizon?
Am I holding this for a year, five years, or indefinitely as part of our income strategy? This matters because a fund can look “bad” over a short window and still be doing exactly what it’s supposed to over a longer one.
Knowing my horizon upfront tells me how much short-term noise I’m willing to sit through. Personally, I never invest in something I'm not willing to hold long term, as long as the underlying function or intention of the fund stays the same.
This is where I actually get under the hood.
What does it hold?
Is it broad-based like the S&P 500, or is it concentrated in a sector (e.g., tech or healthcare only) or even a single company stock (e.g., Tesla)? I want to know exactly what I’m exposed to, not just the ticker’s performance.
Two funds can both call themselves “tech income” and hold completely different baskets of stocks underneath. I actually open the holdings list on the fund manager's website, read all the names of the companies it holds, and make sure I know what they are.
How long has it existed?
A fund with five years of history tells me a very different story than one that launched eight months ago, because I can potentially see how it performed through a change in market cycle, a recent downturn, or the last bull market (increasing trend in prices).
Newer isn’t automatically bad. Some newer funds are simply better-designed versions of older strategies, but I do treat a young fund’s yield and stability claims with a bit more caution, since there’s less real-world proof behind them yet. As a general rule, I don’t often invest in a covered call ETF with less than a year of performance history.
How is the covered call strategy actually structured?
This is a big one, and it’s specific to how these funds generate their income. I want to know what percentage of the portfolio actually has calls written against it. Is it 25%, 50%, 100%?
A fund writing calls on the whole portfolio (100%) gives up much more of its upside than one only covering a quarter of it. For me, growth of the underlying assets is important, so we only invest in funds with 50% or less coverage.
I also want to know whether the calls being sold are at-the-money or out-of-the-money, since that affects both how much income comes in and how much room the underlying stock still has to grow before the call caps it.
And I want to know the expiration length. Is this fund writing 30-day calls, weekly calls, or 0DTE (same-day expiration)? Shorter-dated calls usually mean more frequent income and more active management, but also more trading activity happening under the hood. None of this is a dealbreaker on its own, but it’s the actual mechanism behind the yield, so I want to understand it, not just accept the number on the page.
I've used Claude AI extensively to help me understand all of this in simple terms. What once felt like a mystery now feels like familiar territory. It's worth spending the time to make this all make sense to you before you put your hard-earned cash in the market.
Does it use leverage, and how much?
Leverage means the fund is borrowing money to increase its exposure. That can boost income, but it amplifies losses on the way down too. I want to know the exact amount of leverage being used (funds usually state this as a percentage, like 25% or 50% leveraged), and I want to be honest with myself about whether I’m comfortable holding that extra risk before I buy a single share. Personally, 25% is my risk cap for leverage on a fund.
What are the total fees, and do I understand why they’re what they are?
I always look at the full picture here: the management expense ratio (MER), the trading expense ratio (TER), and the total ETF expenses combined. A high fee isn’t automatically a dealbreaker, but I want to know why it’s high. Sometimes it’s just a cost charged by the management company.
Other times, a chunk of that fee is going toward the cost of leverage, or toward a more actively managed strategy. A fund running a 0DTE (same-day expiration) options strategy is going to trade far more often than one writing monthly calls, and that extra activity costs more to manage.
I also make sure I know whether the yield I’m looking at is quoted gross or net of these fees, since a distribution that’s already net of fees tells a very different story than one that hasn’t accounted for them yet.
One of the arguments against covered call funds is the higher fees, and there is validity to this argument. The management fees are usually higher. For me, there are more pros to the strategy that outweigh the high fees, like steady cash flow, the ability to retire early, and never having to worry about when the best time is to sell shares if we need cash for living expenses.
Have I actually read the fund’s info page?
This sounds obvious, but it’s the step people skip most. The fund manager’s own website will tell you the strategy, the fees, the holdings, and the risks in plain language. I don’t buy anything I haven’t read the page for. To find it, just Google the name of the fund or the ticker symbol and it'll pop up.
What’s the current trend/performance?
Up, down, or choppy, I look at both the unit price (today’s actual price, A.K.A. the Net Asset Value (NAV)) and the total return, which is today’s price of the fund if all the distributions were reinvested back in. You can visit this website to see the total return and NAV of the fund you are researching.
As a rule of thumb, I don’t invest in anything that has a declining stock price (NAV) over time.I want a fund that, at minimum, retains its invested value while paying income. My best-case scenario is a fund that is able to increase the value of the NAV over time (capital gain) while paying a steady distribution monthly.
How has it handled past downturns?
If the fund has been around long enough, I look at how it behaved the last time the broader market dropped, like 2022. Specifically, I check whether the distribution held steady through that period, or whether it got cut. (You can check this on this website by searching the ticker symbol in question.)
A fund that kept paying through a rough stretch tells me a lot more about its durability than one that’s only ever existed during a calm market.
Is the fund manager reputable?
I look at how long the company has been managing funds, how much total money they have under management (their AUM), and whether they run other funds with a solid track record. A large, established manager with billions under management and a decade of history is a very different bet than a brand-new firm launching its first product. I’m trusting them with real money, so I want to actually know who they are before I hand it over.
Has it ever missed a distribution?
I check the fund’s distribution history directly on the manager’s website, not just take the current yield at face value. A missed or cut distribution in the past doesn’t automatically disqualify a fund, but it tells me something important about how sustainable that payout has actually been under pressure, which matters a lot for an income-focused portfolio.
Are the distributions consistent or variable?
Some funds pay the exact same amount every single month. Others fluctuate month to month based on how the options strategy performed. Neither is automatically wrong, but I need to know which one I’m signing up for, since a variable payout makes monthly budgeting a lot harder to plan around than a steady one. Almost all of our covered call funds pay the same distribution month to month.
How often does it pay?
You will find that different funds pay semi-monthly, monthly, or quarterly. This matters for cash flow planning, especially if you’re relying on this income the way we do.
A semi-monthly or monthly payer smooths out your cash flow into small, frequent deposits. A quarterly payer means bigger, less frequent lump sums that you have to budget around differently.
We exited all of our quarterly positions back in 2024 in favour of monthly distributions.
What’s the current yield, and is it sustainable?
I look at the current distribution rate (the most recent payment, annualized), not just the trailing 12-month yield, since a fund’s payout can change over time.
A high yield can be a great thing, or it can be a warning sign that the fund is paying out more than it’s actually generating. I want to understand why the yield is what it is before I get excited about the number, and I want to know whether that yield is quoted gross or net of fees, since that changes what it’s actually telling me.
Wondering if the yields are sustainable? Check out this article I wrote entitled Is a 14% Yield Too Good to Be True? What Most Investors Don’t Know About Covered Call ETFs.
When’s the ex-dividend date?
This is the cutoff date. I need to own the fund before this date to receive the next payment.Buying on or after it means I’ll miss the next distribution payout and have to wait for the following cycle.
It’s different from the payment date (when the money actually lands in my account), which usually comes a few days to a couple of weeks later. Knowing both dates tells me exactly when to expect my first deposit if I buy today.
You can easily check this at dividendhistory.org.
Is my portfolio actually diversified?
I check this four ways: across sectors (am I too concentrated in tech, or financials, or one theme), across fund managers (am I relying on one company’s strategy for most of my income), within the fund itself (does it hold 20 stocks or 200), and geographically (am I invested in the U.S., Canada, or worldwide).
It’s easy to feel diversified while actually owning five different funds that all hold the same handful of mega-cap tech names underneath. I’ve started actually looking at the top holdings list of each fund I own to check for that overlap, not just assuming different tickers mean different exposure.
How does this compare to similar funds?
Before I commit, I look at a few other funds doing a similar job side by side: yield, fees, structure, performance, and total return. Sites like stockanalysis.com make this easy to do quickly. Sometimes the fund I was originally excited about isn’t actually the best version of that idea available, and I’d rather find that out before I buy than after.
That’s the framework, 19 questions, 5 lenses. Every time I add meaningfully to a position, I’m running it through these same five lenses.
One big lesson I’ve learned when choosing a new fund is to always start with a small test position, particularly if a new fund only has a year of performance.
We've made this mistake before: investing in a fund that had only been around six months, and we got burned to the tune of $20,000+.
A good rule of thumb we follow is to invest no more than 1-2% of our money into a new fund until it has been around for at least 3 years.
Now I know that this giant list of questions can feel daunting and overwhelming, so it’ll be helpful to read my follow-up article that walks you through an actual example fund step-by-step.
You’ll be able to hear my thoughts on how I assess this new fund as I walk through all 19 questions.
It will be part of a new, recurring series called Fund Breakdown where I will be analyzing a new fund I am considering adding to our portfolio.
The first fund I will be reviewing is QDAY.TO from Hamilton ETFs. It is a technology-focussed covered call ETF that has a unique call writing structure.
Read it here:
So before we wrap up, was that helpful? Do you still have questions?
Want me to break one particular question or concept down in a detailed article?
Leave a comment and I’d be happy to give a deeper explanation.
Have an awesome week ahead.
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