Incomes $400 a month in passive earnings—$4,800 yearly—may not sound like a lot at first. However take a second to essentially give it some thought.

If you happen to might generate that utterly hands-off (and tax-free in a Tax-Free Financial savings Account, or TFSA), it might cowl your automotive cost, insurance coverage, cellphone and web invoice, utilities, or perhaps a few good nights out. It’s the sort of cushion that may make life just a little simpler and much more pleasing.

So, how a lot would it is advisable make investments to make this occur? Because of some distinctive funds from Hamilton ETFs, it is likely to be lower than you assume.

Let’s crunch the numbers utilizing Hamilton Enhanced Multi-Sector Lined Name ETF (TSX:HDIV) to see how a lot it is advisable flip this concept right into a actuality.

What’s HDIV?

HDIV is a fund of funds, that means it holds different Hamilton-covered name ETFs throughout a number of sectors. It’s designed to reflect the composition of the S&P/TSX 60, providing broad publicity to Canadian large-cap shares.

HDIV employs a lined name technique, the place name choices are written on a part of the portfolio. This method sacrifices some upside potential in alternate for producing increased earnings from the premiums collected. It’s not with out trade-offs however supplies a distinct method to notice positive factors.

To offset the capped upside, HDIV makes use of 25% leverage, or 1.25x. This amplifies returns throughout constructive markets but additionally will increase losses throughout downturns. Traditionally, this mixture has labored effectively, with HDIV outperforming the broader Canadian market.

Presently, HDIV delivers an 11.8% annualized yield. Its distributions usually go ex-dividend on the final day of the month and are paid out throughout the first week of the next month. It’s a sensible alternative for traders searching for dependable earnings.

How a lot to speculate?

Assuming HDIV’s most up-to-date November seventh month-to-month distribution of $0.171 and a share worth of $17.97 as of writing remained constant transferring ahead, an investor utilizing a TFSA would wish to purchase roughly $42,031.83 price of HDIV, akin to 2,339 shares to obtain round $400 month-to-month tax-free.