What is ZPAY?

I have read some confusing and incorrect information on ZPAY on the Web. Some of this erroneous info was published here. Let us take a moment to get the truth out.

The BMO PremiumYield ETF (ZPAY), based on a mix of large, highly-capitalized, U.S. firms, uses a derivative instruments strategy to minimize volatility while increasing the yield. The bank gives ZPAY a risk rating of low to medium.

Read the BMO post HERE.

ZPAY is not a bond-based ETF.

I am running a test of ZPAY and over the coming months we all may learn whether of not there is a place for ZPAY in our portfolios.

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This post corrects the errors made in referring to ZPAY in previous posts. ZPAY is NOT based on bonds but on U.S. equities. Read the second paragraph above. I thank you for taking note of this correction.

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Almost half way through June and I have figures for my comparison test. $100,000 invested in each ETF.

• ZPAY: $1108 gain
• ZAG; $944
• XSB: $98
• XBB: $748
• XIC:$1474
• VEQT: $1735

My gut feeling is that in a severe downturn, ZPAY will lose a lot but not as much as the other equity ETFs (XIC and VEQT). It may lose more than the bonds funds but I'm hoping when the 6.5% yield is factored in, ZPAY will be very competitive with the bond-based ETFs such as XSB. I'm curious as to the outcome when pitted against XBB and ZAG. ZAG is very popular with financial advisors and experts publishing on the Internet.

In a severe downturn, if it loses less than the other equity ETFs, selling ZPAY to move into high yielding dividend paying stocks will make sense. Time will tell. Stay tuned.