Name: Inside ETFs: Is cautious investing the new edge?
Uploaded: 2026-03-17T16:55:44.000Z
Duration: 5 min 37 s
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Are dividends your safe harbor or a leaky life raft?

This is inside ETFs and we're talking about dividend funds.

Middle east tensions are hammering risk appetite.

And even America's famously bullish retail investors are hitting pause.

Dividend ETFs are usually the classic volatility cushion.

But Yield Max isn't just playing defense, paring dividends with an options overlay to chase premium income, a cash machine or a crash test dummy?

Well, let's ask Mike Koh, strategist at Yieldmax ETFs.

So, Mike, this ETF could thrive in a full blown market panic as investors stampede from growth to value.

But by layering options on individual stocks, are you boosting income or amplifying risk?

We don't think it's actually going to increase risk because the options overlay involves selling call spreads on top of these stocks.

So actually, if the stocks do poorly, and

hopefully they won't, because these are dividend stocks, they tend to be more consistent, they tend to be less volatile because you're already getting distributions that mitigates the risk of these.

In any case, if the stocks just trend sideways or if they don't do as well, they're actually going to do a little bit better because you're going to be collecting some options premium in addition to the dividends.

Traditional dividend ETFs lean on defensive sectors, including energy and health care.

But does your options overlay follow the same playbook or can you pivot to companies of the moment?

So ours is basically going to be dictated by the constituents that are in the Dow Jones Dividend 100 Index.

So there is another ETF here, SCHD, that tracks that same index.

But in that sense, there's not going to be any stock picking per se that we do.

Basically, you're just taking a look at the universe of stocks, those that tend to pay, as you pointed out earlier, higher dividends.

You know, they tend to come from sort of more conservative areas in the market.

You know, you figure that when companies are still in their growth phase, they're not focusing on returning capital to shareholders at that point, but

And that's a critical reason why many people invest in them.

But Wall Street's biggest banks insist that their book is holds even with Iran tensions flaring.

But your strategy feels tailored for crisis mode.

What happens when the headlines flip and the market's Mood swings on a dime.

You know, the economic backdrop, if we didn't have what's going on right now, would actually look pretty good.

I think we have a situation where, you know, good markets climb walls of worry.

There's always something that people are concerned about.

I think really the way to think about this is that there is a class of investors who are specifically interested in making sure that they're getting distributions.

That's one of the critical reasons that they invest.

So there are people who are trying to accumulate wealth.

There are people who have already, you know, save some money and now need to actually use that to live their lives.

And that's essentially what I think a product like this is for.

Let's look at some of your top holdings in the fund.

So if oil giants are prioritizing future flexibility over dividends is not a red flag for your income focused approach, it is not surprising that there's going to be energy companies in there.

And you know, obviously we're in an environment right now where these companies, you know, are they going to face higher capital costs but they're also selling a global commodity, commodity at unfortunately for consumers at the pump highs as we're seeing.

I mean, if you look at West Texas Intermediate, which is the US benchmark for crude that was $55 a barrel in mid December and it hit as much as $119.46 over the weekend two weeks ago as people were most concerned about what's going on around the Strait of Hormuz.

And as you know, you know, the global benchmark, which is Brent, is actually even slightly higher than that.

So I think the integrated oil companies are going to continue to be well positioned.

And I think, you know, there was a period of time where a lot of these companies maybe hadn't been reinvesting as much as they had.

You know, the largest integrated oil company, ExxonMobil, had always made a point of replacing their reserves each year.

And there was a brief period of time where they stopped doing that.

I think really the sense of it is that we're going to have fossil fuels like oil with us for a little bit longer maybe than some investors and had forecast a few years ago.

But as you look at the fund, I mean, there are 100 stocks in it.

Obviously we need it, but that's not the only thing that's there.

So finally Mike, with Middle Eastern conflict threatening an energy price spiral as well as valuations near record highs, the risk of a brutal investor wake up call is rising.

Could one bad earnings quarter crack your strategy?

You know, a bad earnings can always crack any given stock.

I think if you have a really concentrated portfolio.

Imagine that you had a portfolio of 20 stocks or so, 5% in any given stock and one of them gets sawed in half.

That's a 250 basis point hit to the portfolio.

But when you have it as diversified as this one, as many individual constituents, it's pretty diversified in our view.

We have things like Coke and Pepsi and we have the telecoms in there.

These aren't the kinds of companies that typically move as much as some of the companies that are going to be reporting this week, like Micron Technologies might.

So, you know, I think this is really tailored for conservative investors.

We offer a wide variety of ETFs for the aggressive options, income overlay strategies and single stocks, all the way down to a really diversified one like this one.

I would consider this probably the most conservative inside our portfolio.

Don't forget, you can watch more videos on Reuters.com.

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Inside ETFs: Is cautious investing the new edge?

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