In my book I explain how I use a covered call strategy to get the kind of return that I want for my portfolio. By comparing it to a rental property, I show how I like to use dividend stocks and trade around them with options to increase my overall yield. When you buy a dividend buying stock it is like buying a rental property with one tenant. You’ll collect that income from them each quarter, year after year, just like rent.

I like to buy big blue chip dividend companies with a 3-5% yield. If we continue like the past, good dividend companies increase slowly over time and when they have extra profit they increase the dividend payment to their shareholders. It’s similar to how housing prices have increased along with rental prices.

Now when I write covered calls on the position, I then add another tenant to my rental. I now have two sources of rent. One source from the call and one from the dividend. I go from getting a 3-5% yield to getting twice that amount when you write these covered calls every other month.

Using this strategy of buying blocks of big blue chip stocks and trading options around them gives me a much better yield. And with this increased yield I will re-invest the money to keep growing my portfolio. It has been working very well for me right now. In my book I explain how I do this and get a third renter by selling puts too!

Keeping my strategy in mind, I’ve come across an entire basket of Horizon’s AlphaPro covered call options ETFs! This takes my strategy and makes it crazy simple for everyday investors. You don’t have to write the calls each month, and you don’t have to worry about replacing the stocks that get called away. There are all of my favourite sectors, like Energy, Financials, and Gold. Plus they’ve just launched a US Equity (CDN $ headged) covered call ETF that helps diversify the portfolio.

The ETFs will sell covered calls on the basket of stocks every 1-2 months at about 5% over the current stock price. In any market other than a crazy bull market, this strategy has been shown to outperform. The fund management fees are only 0.65% too.

Here is what I would do for sector break down:

20 % HEE – AlphaPro Enhanced Income Energy

20% HEF- AlphaPro Enhanced Income Financials

10% HEP- AlphaPro Enhanced Income Gold

25% HEX – AlphaPro Enhanced Income CDN Equity

25% HES.UN – AlphaPro Enhanced Income U.S. Equity (It converts to an ETF soon)

This portfolio currently has over a 10% yield thanks to the extra income from writing the calls. It also writes calls on non-dividend paying companies in the index to generate income on stocks that otherwise wouldn’t have some. The ETFs are available in a DRIP (Dividend Re-investment Program) so that the juicy monthly yield buys more units. Right now HEE is paying a 16% yield and we all know how I love big yield. All we need now is an AlphaPro International Equity covered call ETF!

I heart Horzon’s new covered call ETFs,

Dave

There are many pluses to this strategy.  Firstly, you increase your yield from only the dividend income by adding the income from the options.  Secondly, the income is tax preferred.  Compared to money from bond income, dividends and the option premiums are tax preferred.  Thirdly, if the options aren’t exercised, the holder keeps the upside of the stock.  Only 20% of options are exercised. Lastly, when markets are bearish the sold options will collect even more premium because of higher volatility levels.  Win win for income investors like us!

It’s kind of like having a rental property and having two floors rented out.  You gain the income from the dividends and then another stream from the selling of the options.  I hold my stocks like the rental property and collect these two streams over the long term, just like how a rental property works.

This strategy takes time to manage.  I constantly need to monitor my option positions and re-write them when the positions expire every few months.  To my delight, BMO has come out with the BMO Covered Call Canadian Banks Exchange Traded Fund or ETF.  It performs everything I described above on our 5 big banks, BMO, TD, ROYAL, NATIONAL, CIBC and SCOTIA, but it can be bought and sold as an Exchange Traded Fund, symbol ZWB.

Currently it has over  a 9% yield and has still appreciated over $1 to $16 from it’s $15 launch price in Jan 2011.  Being a common reader you know that I love yield and for a measly .65 Management Expense Ration it is very cheap to hold for a long time.  Most mutual funds are over 1% Management Expense Ration and are half as sophisticated.

Check out the product at the link below.  I don’t own it yet but It’ll be added shortly for sure.

BMO Covered Call Canadian Banks

Keep loving your money and it’ll love you back with a great yield,

Dave

BMO Covered Call Canadian Banks ETF Objective

BMO Covered Call Canadian Banks ETF seeks to provide Unitholders with exposure to the performance of a portfolio of Canadian banks and monthly distributions while mitigating downside risk. Currently, the investment strategy of BMO Covered Call Canadian Banks ETF is to invest in and hold the securities of Canadian banks, Units of BMO S&P/TSX Equal Weight Banks Index ETF or a combination of these. In addition, depending on market volatility and other factors, BMO Covered Call Canadian Banks ETF will write covered call options on these securities. Under such call options, the fund will sell to the buyer of the option, for a premium, either a right to buy the security from the fund at an exercise price or, if the option is cash settled, the right to a payment from the fund equal to the difference between the value of the security and the exercise price.

My friend Chris on our Route 66 road trip!

I just got my yearly car insurance bill and I saved more money again!  Insurance is one of those expenses where you hate to pay but need to have it.  Why not trim those premiums and try to make some money in the process?  That’s how we roll, right?  Here are some of the things I do to take the itch out of insurance prices.  Enjoy my money monkeys!

Reduce Your Deductible

I would never claim any damage under $1,000 so why not increase my deductible to that amount.  When my insurance agency tried to get me to reduce my deductible it would have cost me $1,000 a year.  I’ll save that $1,000 and keep it in my rainy day emergency fund making me interest.

Keep All of Your Insurance Policies At One Place

I save 5% for each insurance policy I have with my insurance company.  I keep my house and car insurance at the same firm to save that 5%. When I get my plane, boat, and cottage insurance with them I’ll save even more

Shop Around!

I love harassing the poor customer retention department staff.  When they call I’ll charm them by telling them what a great customer I am and how I deserve a better discount.  I’ll phone their competitors and if I find a better price I’ll have them beat it!  It’s getting very competitive in the insurance industry and they will bend over backwards to keep good customers.

Affiliate Discount Programs

Ask at work or your spouse’s work if you have any affiliate programs with insurance companies.  Being associated with a large company can save you a lot of money.  I get a discount for also being a UWO alumni.  Finally my schooling is paying me back!

Ditch The Extras

Get rid of any rental car benefits.  Cheap cars will cost you $20 a day.  Towing and other perks should be kept to a minimum that cost you more.  Think how often you get into an accident vs. how many years you pay these extra fees.

Buy The Insurance Company Stock

Insurance companies have great profits so why not buy their stock?  Do your research and if the stock pays a dividend and has been a good performer why not let them pay you a premium for a change?

Love your money and it’ll love you back with savvy insurance,

Dave

– SPEND on your perfect items. You’ll wear them way more and won’t buy as much saving money in the long run. If applied to spending on clothes, the perfect cocktail dress or suit that makes you feel like a million bucks when you wear it is worth spending on.  If you wear it all the time because you feel good in it and get compliments then it will pay for itself by the good things that happen to you when you put it on.  Feeling good in meetings is a huge advantage and will pay you back with greater results at work.  Plus, if you cut out on spending on the things that will just sit at the back of your closet that you never use, you’ll actually save money in the long run.  Only buy your perfect items and then love them!

- USE credit cards to get cash back and build your credit.  Charge all of your fixed costs onto a no fee BMO MasterCard CashBack credit card, like gas, insurance, cell phone, gym, utilities, cable, and internet.  You will get cash back on the things you need to use your card on and collect cash back dollars month by month.  Also, use your card for trips, furniture, and other big one-time purchases, it all adds up at the end of the year.  David received $271.02 back on these things this year!  That means free utilities for a month or a nice dinner with a good friend.

- BUY luxury cars – Never lease a car always buy it. You will pay interest on the entire product and you don’t even own it if you lease. Buy it used to save on the initial cost, loan interest and insurance. Buy a luxury car, it’ll depreciate more slowly, have more options, be safer, and easier to sell if you need to.

Being a miser will only keep a negative attitude towards money.  Spend smarter and enjoy your life!

Have an awesome week,

Dave

What I do is look for stocks that pay a sweet sweet dividend and have some upside.  I like larger companies that have been around for a while.  I buy the stock and keep it through the ups and downs as long as the story continues (oil needs to keep going up).  I don’t watch the day to day value as much as I focus on the dividend increases each year.

1.  Use an ETF to pick the largest stocks in the industry.  The ishares ETF XEG is a great way to find out which oil stocks are the largest on the TSX.  IYE will tell you the largest in the US.  This brings the cream to the top of the list.

ishares.ca XEG

ishares.com IYE

2. Scan each one for yield.  I like to grab a 3% or higher.  I own Penn West from this group and it’s been great over the last few years from the XEG.

3. Look to see how they performed on a chart of the last few months.  When we had the crisis and oil shot up what stocks performed the best.  You can also check out the return over the last year.  The trick is to get a great yield with lots of upside from the stock!

4. Review what other analysts are saying about the stock.  You can check this out on CNBC.com or Yahoo Finance.  Just see how many anaylysts rate it as a buy vs. hold or sell.  That’ll give you a feel for what the market expects from your stock.

5. Now don’t buy an ETF – buy the stock in an online discount broker and keep it until the story changes.  You’ll pay $7 or less and then have that stock, moving up with the market and paying each quarter sweet sweet dividends.

Love your money and it’ll love you back with stocks that go up and pay you on the way!

Dave

1. Buy a car that is fuel efficient – this will be more important as fuel breaks $100 a barrel  this year.  I love cars but I also love my money so I got the most fuel efficient but performance driven car.  I have an Audi A5 but with the turbo engine instead of the V6.  Not only is it a driver’s car but I get really good fuel economy.  That is smart for my pocket book and the environment.

2. Get a fuel cash back card and use it.  There are many cards on the market.  I use the BMO Mastercard and fill up at Shell getting 1.5% back on my fuel. Then I pay cash when I’m in the US because you save .10 a gallon.  That is around $1.50 a fill up or $78 a year.

3. Find a cheap gas station a little out of the way and make a route to hit it once a week to fuel up.  In Toronto my place is the Shell on Dupont between Lansdowne and Dufferin.  It’s always $0.05 a litre cheaper and I get my cash back when I use my BMO Mastercard.  In Silver Lake I use the stations at Melrose and Vermont.  They are always $0.10- $0.20 cheaper a gallon than anywhere else in Hollywood.

4. Buy a basket of energy trusts and collect the dividends – not only will you get the stream of income, most of the time monthly, from the royalty or energy trusts you will get all of the upside.  I have 30% of my portfolio in oil or gas stocks and as oil increases in price, it will offset the increase in gas prices.  Oil is only going up from here until we move to a new resource – and I can’t see that happening for a good 20 or more years.

5. Walk or use transit whenever possible.  It’s good for your body and wallet.  You want to keep both firm and fully packed, right?!

Love your money by being smart with oil stocks and it’ll love you back with free gas and a pumped up nest egg,

Dave

I love stellar restaurants.  I also love my family.  So when they were here visiting at Christmas I wanted to show them all the best places in Hollywood that I’ve found.  I took them to my favorite French bistro, Figaro, in Los Felix Village.  We watched for stars at the super yummy Joan’s on 3rd.  We even went to West Hollywood to the classic Chateau Marmont for dinner under the stars. This city has an endless number of great places to eat!

Now eating at all the best places can get pricey, so we would average down the expensive dinners with less expensive ones.  We balanced an expensive five star dinner with pizza and salad at my place.  We had brunch at an adorable, inexpensive diner on Fairfax before hitting a trendy hot spot in the evening.  (Many times the diners are my fav!)

I had some morning show appearances in San Diego so I took my family with me.    After my interviews we asked locals about cheap but chic places to eat in Little Italy.  On the way back we drove up the beautiful Pacific highway and ate at a sea side restaurant under the sun.  It was not only an amazing meal but a great view of the Pacific. Definitely a meal to remember.

It’s ok to spend money on the things you love. The smart way to do this is to average down your costs whenever you can.

What is a better gift to give than the gift of financial success!  It’s available at these fine retailers!

US Edition in book and Kindle format – amazon.com

Canadian Edition:

Book City

348 Danforth Ave, Toronto

1430 Yonge St, Toronto

1950 Queen Street East, Toronto

Nicholas Hoare

45 Front Steet East, Toronto

Ben Mcnally

366 Bay Street

Books For Business

120 Adelaide Street

Indigo / Chapters:

Montreal (St. Catherine St.)

Woodbridge

Yorkdale

Yonge and Eglinton

Bayview Village

Thornhill

Square One

Since my first print run in May I’ve already almost sold out of my first edition!  Thanks for everyone who has bought a copy. I really appreciate your support.

I’ve heard from the book store managers that the first print edition appreciates the most.  So my advice this week is to run out and get one of the last copies for the holiday, friends, kids, Nana and Papa! There are very few left so grab a first edition and profit!  :)

Here is where to still get a copy.  The second print is coming in two weeks!

Book City

348 Danforth Ave, Toronto

1430 Yonge St, Toronto

1950 Queen Street East, Toronto

Nicholas Hoare

45 Front Steet East, Toronto

Ben Mcnally

366 Bay Street

Books For Business

120 Adelaide Street

Indigo / Chapters:

Montreal (St. Catherine St.)

Woodbridge

Yorkdale

Yonge and Eglinton

Bayview Village

Thornhill

Square One

When we need to go somewhere in our lives financially we need to set the course and then anchor ourselves with what we will truly have when we get there.  If you want to save $500 a month into your RSP this year then there are some steps you need to take.

1. Visualize how amazing you want your retirement to be.  Greek Islands?  Turkish Coast?  Maybe NYC brownstone?  Get the excited feeling when you think about it.  Butterflies single that you’re there.

2. Set up the $500 automatically to come out of your account so you don’t have the chance to stop it.  Be sure to set up the auto investment part too so that you are buying good investments that will pay you a dividend to get you there faster.  Dividends are the key to my hart to by lots.

3. This is the best part.  What are you going to get if you do it?  You could get hit by a tractor and not be able to enjoy it so how do you still live for the now while saving?  What kind of banana do you want?

If you invested $500 a month into an registered retirement plan you would get some tax back at the end of the year.  Allocate that money towards a trip, motorcycle or scuba diving lessons that would truly motivate you to keep up the saving.  You get an amazing retirement and get to live for today too.

Love your money and it’ll love you back with delicious bananas,

Dave