When your inbox is full of low-rate bank notices and the yield on cash looks deficient, building reliable income takes a bit more than buying the first bond you see.
For decades, Canadian investors looking for income leaned heavily on bonds. But 2025’s market backdrop—volatile rates, persistent inflation, and uneven yields—has challenged the traditional “set it and forget it” approach of bonds.
Bond prices move inversely to interest rates, so relying solely on longer-duration fixed income investments like bonds means that in a rising-rate environment they can suffer steep losses. But that doesn’t mean bonds are obsolete as part of a balanced portfolio. Instead, it means income investing now calls for a broader toolkit.
Exchange-traded funds (ETFs) have broadened access to dividend investing, covered call strategies, and fixed income investments in ways tailored to today’s environment. Indeed, there has been a growing demand for shorter or mid-duration bond ETFs as rate volatility shapes investor behaviour.¹
Used together fixed income, and covered call funds offer flexible ETF income strategies that can power both passive income strategies and retirement income strategies. So, think of your portfolio like a toolkit, and use the right tool for the right job.
Fixed Income ETFs: More Flexibility
The next tool to consider is fixed income ETFs.
Fixed income investments—ones that offer predictable, regular payments (interest or dividends) over a set period of time—are still foundational to an income portfolio.³
Instead of locking into long-term government bonds, many investors are turning to ETFs with shorter to mid-term maturities. Evolve’s Enhanced Yield Mid Term Bond Fund (MIDB), launched in April 2025, was created for just this purpose. It seeks to generate an attractive monthly income while managing the risks associated with interest rate fluctuations. Another option is the Canadian Aggregate Bond Enhanced Yield Fund (AGG), which focuses on Canadian bonds and combines a traditional bond portfolio with a covered call overlay to enhance distributions. These kinds of products are particularly well suited to inclusion in RRSPs, where the interest income can grow tax-deferred.
Covered Call ETFs: Turning Volatility into Income
Beyond dividends and traditional bonds, covered call ETFs add another tool to your toolbox.
A covered call strategy involves selling call options on existing holdings to generate premium income. While this caps upside potential in strong equity rallies, it can materially boost the regular cash flow investors receive.⁴
Evolve has integrated this strategy across multiple funds. AGG, for instance, doesn’t just provide bond exposure; it also writes call options to deliver enhanced yield.
On the equity side, covered call ETFs provide access to stocks while turning equity exposure into a steady stream of distributions. For investors who prioritize passive income strategies over maximum growth, these structures can play an important role. Evolve’s Canadian Equity UltraYield ETF (CANY) is one such example. CANY uses a covered call strategy to offer investors modestly levered exposure (1.33x) to a portfolio of leading Canadian equity securities that have the potential to generate significant option premiums.*
Covered call ETFs often make the most sense in non-registered accounts, where dividends can benefit from the dividend tax credit and capital gains treatment, though investors should remain mindful of the trade-offs.
Building a Resilient Income Toolkit with ETFs
For Canadian DIY investors, building a modern income toolkit means layering strategies through ETFs. Evolve ETFs offers several funds that fit neatly into this framework.
Evolve Enhanced Yield Mid Term Bond Fund (MIDB) seeks to provide investors with attractive monthly income and long-term capital appreciation by targeting a medium-duration fixed income portfolio by investing primarily in fixed income ETFs or fixed income securities issued in either the United States or Canada with an added active covered call strategy.
Evolve Canadian Aggregate Bond Enhanced Yield Fund (AGG ETF) offers diversified exposure to the Canadian bond market, with the added benefit of tax-efficient, enhanced income. AGG seeks to provide investors with attractive monthly income and long-term capital appreciation by investing primarily in fixed-income ETFs or fixed-income securities primarily issued in Canada. To enhance yield, as well as to mitigate risk and reduce volatility, AGG will employ a covered call option.
Evolve Canadian Equity UltraYield ETF (CANY) aims to offer investors modestly levered exposure (1.33x) to a portfolio of leading Canadian equity securities that have the potential to generate significant option premiums.* CANY will employ a covered call option, the level of which may vary based on market volatility and other factors.
For more information on these or any of our other ETF products, visit our website.
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Source: Getty Images Credit: Krongkaew
ENDNOTES
- Ziafati, N., “New fixed-income ETFs aim to capitalize on lower interest rate environment,” Investment Executive, October 18, 2024; https://www.investmentexecutive.com/news/products/new-fixed-income-etfs-aim-to-capitalize-on-lower-interest-rate-environment/
- “What is Dividend Investing and What are Qualified Dividends?,” Equifax, August 27, 2024; https://www.equifax.com/personal/education/personal-finance/articles/-/learn/dividend-investing/
- Loveland, M., “Fixed-Income Investments,” Business Insider, July 18, 2024; https://www.businessinsider.com/personal-finance/investing/what-is-fixed-income-investing
- Ganti, A., “Covered Calls: How They Work and How to Use Them in Investing,” Investopedia, June 04, 2025; https://www.investopedia.com/terms/c/coveredcall.asp
- “The Tax-Free Savings Account (TFSA),” Canada Revenue Agency, July 7, 2025; https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account.html
- “Registered Retirement Savings Plan (RRSP),” Canada Revenue Agency, February 1, 2025; https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/registered-retirement-savings-plan-rrsp.html
DISCLAIMER
Published October 20, 2025.
Evolve Funds Group Inc. is the investment fund manager and portfolio manager. All funds described herein is offered by Evolve Funds Group Inc., and distributed through authorized dealers.
The information contained herein is a general description and is not intended to be specific investment advice to any particular investor nor intended to be investment or tax advice. You should not act or rely on the information contained herein without seeking the advice of an appropriate professional advisor. The information contained herein is intended for informational purposes as a summary only, does not constitute an offer to sell any securities or a legally binding obligation, it is qualified entirely by, and should be read in conjunction with, the more detailed information appearing in the prospectuses found on the Evolve Funds Group Inc website at https://evolveetfs.com/
*Leverage increases risk.
Commissions, trailing commissions, management fees and expenses all may be associated with exchange traded funds (ETFs) and mutual funds. Please read the prospectus before investing. ETFs and mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
Certain statements contained herein are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Evolve Funds Group Inc. and the portfolio manager believe to be reasonable assumptions, neither Evolve Funds Group Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
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