3 ways to recession-proof your RRIF

Finally, some yield-hungry investors are turning to ETFs that use a covered call writing strategy to generate additional cash flow from stock holdings. This strategy uses call options, a type of contract between two parties that gives the buyer the right, but not the obligation, to buy a stock at a certain price within a certain time frame. The buyer pays a fee (premium), which the seller keeps even if the buyer doesn’t end up exercising the option.

The Harvest Canadian Equity Enhanced Income Leaders ETF (HLFE) is an example of a covered call ETF. It holds the Harvest Canadian Equity Income Leaders ETF (HLIF), which has a portfolio of 30 large-cap Canadian dividend-paying companies and uses covered call writing plus modest leverage to help generate a higher monthly income (7.56% annual yield as of Feb. 24, 2023). (Learn more about call options and retirement.)

3. Consider investing in REITs

Real estate investment trusts (REITs) typically offer a higher monthly income than a broad-based dividend strategy. With REITs, investors get exposure to all kinds of properties including apartments, hotels, office buildings, shopping centres, storage facilities and warehouses. These properties generate income from rent, which are paid out to REIT unitholders.

The easiest way to invest in REITs is to use a REIT-focused ETF for maximum exposure and diversification. REIT investors can expect to see yields in the range of 4% to 6% annually (sometimes higher), with modest capital appreciation over time. The Harvest Global REIT Leaders Income ETF (HGR), a portfolio of large-cap REITs, currently yields 8.07% (as of Feb. 24, 2023) and uses an active covered call strategy to generate additional cash flow. Get more information about Harvest ETFs.

Investing in REITs does have a number of risk factors, including market and liquidity risk, so do your research. 

About your RRIF account

RRIF account holders have a lot of investment options at their disposal. In some cases, too many choices can lead to second-guessing and constant tinkering with your portfolio. Decide what type of investment strategy suits your temperament as well as your short- and long-term needs.

Ideally, you want your RRIF portfolio to give you reliable withdrawals to meet your needs this year and possibly up to the next five years, if you’re a conservative investor. It’s possible to achieve this with a mix of high-interest savings ETFs and GICs.

For income-oriented investors, options include dividend-paying ETFs, monthly income ETFs, and ETFs that generate income through covered call writing. This type of income can soothe a nervous investor when the markets throw a tantrum.

Sumber: www.moneysense.ca

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