Income-Focused Investing Often Leaves Too Much on the Table, Says Kathmere CIO

Why It Matters

Yield‑smart ETFs offer investors a way to earn reliable income while avoiding the downside of high‑yield traps, a crucial advantage as markets rotate and volatility spikes around election cycles.

Key Takeaways

• Income ETFs saw 70% AUM growth, outpacing industry 31%
• Covered‑call ETFs target 5‑10% out‑of‑the‑money strikes for additional income
• Yield‑smart approach balances attractive yield with capital appreciation
• Investors rotating from mega‑cap tech to value, resources, international stocks
• Mid‑term election volatility prompts cautious, diversified income strategies

Summary

Amplify’s chief investment officer, Christian, used a recent market‑volatility roundtable to argue that traditional income‑focused strategies often leave performance on the table. He outlined how the firm’s “yield‑smart” ETFs combine dividend exposure with tactical covered‑call writing to generate 5‑6% yields while preserving upside.

The firm reported a 70% jump in assets under management last year, far outpacing the 31% industry average, driven largely by inflows into its option‑enhanced products. Unlike high‑yield “trap” funds that chase maximum premiums, Amplify writes calls only 5‑10% out‑of‑the‑money and scales exposure to a handful of stocks, aiming for total‑return superiority.

Performance data underscore the approach: the U.S. high‑quality ETF DVO rose about 5% YTD, while its international counterpart IDBO posted a 12% gain as global markets climbed 8%. Natural‑resources and precious‑metal ETFs delivered double‑digit returns, and the VIX remains modest, reflecting a resilient macro backdrop with 2% GDP growth and 13% earnings expansion.

For income‑seeking investors, the takeaway is clear: a disciplined, yield‑smart framework can capture steady cash flow without sacrificing capital appreciation, especially as capital rotates from mega‑cap tech to value, mid‑cap, and overseas equities amid mid‑term election uncertainty.

Original Description

Kathmere Capital Management CIO Nick Ryder and Amplify ETFs CEO and founder Christian Magoon dive into how clients and investors are positioning amid the recent downside volatility and how they're weighing the weakness. Ryder also cautions investors who choose to invest on income alone.