Withdrawal Analysis: Covered Calls vs Underlying Assets

In this AMA episode of the Rational Reminder Podcast, Ben Felix and Dan Bortolotti return to answer listener questions across a wide range of topics—from covered call ETFs and dividend tax credits to currency hedging, bond mechanics, leverage, and career reflections. They open with a striking quote from Harvard economist John Campbell on how markets cater to perceived benefits rather than real ones—a perfect setup for their recent discussions on the rise of covered call ETFs.

Key Points From This Episode:

(0:59) John Campbell’s quote on capitalism’s tendency to meet perceived rather than rational needs—and how that perfectly describes the financial industry.

(3:44) Covered calls as the perfect example: products that respond to investor demand for yield, not what’s actually in their best interest.

(4:49) Dan compares income-chasing in covered call ETFs to Apple’s marketing genius—except in finance, the benefits flow mostly to issuers, not investors.

(5:48) Why dividend bias was relatively harmless, but the covered call craze is not—and how new ETFs “multiply like rabbits.”

(7:46) Ben’s analysis: in every example studied, covered call investors ended up with less wealth than those holding the underlying equities.

(8:13) The hidden trade-off: holding covered call ETFs is like keeping 25–30% of your portfolio in cash for a decade.

(9:33) Lighter interlude: Dan teases Ben about his lentil (and later cabbage) lunches.

(9:59) First AMA question: Are domestic dividend tax credits already priced into stock valuations? (Short answer: partially, depending on investor composition.)

(12:13) Why even if tax benefits are “priced in,” Canadians with favorable tax rates still come out ahead.

(15:58) Hedging currencies in commodity economies like Canada and Australia—when it helps, when it hurts, and why there’s no perfect answer.

(18:48) Dan explains why unhedged portfolios can actually be less volatile for Canadians and why most hedging is imprecise and costly in practice.

(20:03) Behavioral perspective: splitting the difference between hedged and unhedged can be the “strategy of least regret.”

(21:06) Bonds demystified—why falling prices during rising rates affect funds and individual bonds equally.

(22:22) Understanding duration: bond ETFs are designed to stay at a target maturity, while individual bonds age toward zero duration.

(26:03) How rising yields actually improve financial plans by boosting future expected returns.

(29:08) Choosing the right bond fund duration based on your time horizon and liabilities.

(33:39) Are recent bond losses an anomaly? Ben and Dan explain how decades of falling rates created unrealistic expectations.

(36:21) The role of unexpected rate changes in bond volatility—and why central banks don’t control long-term yields.

(38:01) Market-cap weighting: why it remains the most defensible way to allocate across countries and sectors.

(41:48) What’s changed their thinking after six years of Rational Reminder—from Scott Cederberg’s asset allocation data to the behavioral power of homeownership.

(45:13) The Horizons/Global X ETF debate: how swap-based, corporate-class structures create tax efficiency—and why that efficiency could vanish.

(50:42) Why PWL avoids these products: potential hidden tax liabilities and lack of transparency for clients.

(54:31) Borrowing to invest: Ben outlines why leverage works in theory—but Dan explains why most investors shouldn’t touch it.

(57:25) New “modest leverage” ETFs (125% exposure) as a more behavioral-friendly version of borrowing to invest.

(1:00:36) Fulfillment and frustration in finance: helping people achieve peace of mind vs. seeing deception still rampant in the industry.

(1:03:09) Five years of Vanguard’s all-in-one ETFs (like VEQT): how they’ve delivered exactly what they promised and reshaped DIY investing in Canada.

(1:07:47) Why these “one-ticket” portfolios remain the biggest innovation in Canadian investing—and why global diversification matters more than ever.

(1:08:50) Revisiting bonds in retirement: what to expect when they don’t offset stock volatility, and how to rethink risk management beyond yield-chasing.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Dan Bortolotti — https://pwlcapital.com/our-team/

Dan Bortolotti on LinkedIn — https://ca.linkedin.com/in/dan-bortolotti-8a482310

Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)