By Caroline Grimont
Last month, we talked about income investing – what it is, how it works, and how to invest for income. Since then, I’ve had a few questions come to be about growth investing, so today, let’s talk about growth investing, and how it differs from income investing.
The first thing to remember is that investing is different for different people. Some people love the thrill of investing and trading in high-risk securities, such as volatile cryptocurrencies, or penny stocks. Others prefer near-guaranteed returns, which you can get with securities such as government bonds. I’d wager that most people fall between these two extremes, and want a bit of income, and a bit of growth.
So, let’s start by talking about what growth investing is, why investors use this strategy, and whether investors need to sacrifice growth to gain income, and vice versa.
What is Growth Investing? Why Do Investors Use This Strategy?
As the name suggests, growth investing is when you invest in stocks or other securities with the expectation of long-term growth. Ideally, in the case of growth investing, one would buy stocks in companies that have a potential to grow over time, which usually means that these companies could fall into either the smaller-cap category (as the share price is lower, the stock would offer more opportunities for growth,) or more innovative sectors such as technology, or cutting-edge pharmaceuticals, or robotics (as these companies could bring new products and technologies into the market, leading to more growth.)
Many investors use growth strategies for longer-term financial goals. For example, if retirement is 30 years away for you, you could afford to take more risks in your current retirement portfolio, so that you could have the potential for more growth and benefit from the power of compounding. A growth strategy is appropriate for investors seeking longer-term growth in their portfolios. The nature of the types of stocks generally considered in the “growth” section means that investors in this strategy could encounter higher volatility. As a result, growth investors need to maintain financial and emotional discipline in investing and should be able to withstand the ups and downs of the stock market.
How Does Income Investing Differ from Growth Investing?
While individual circumstances may vary, in general, income investors could have different priorities as compared to growth investors. Income investors tend to prioritize steady and consistent income over rapid growth. Within stocks, income investors might prefer steady dividend generating companies such as utilities, or Canadian banks and telecom companies, rather than fast paced tech-start ups which pay lower dividends.
Immediately though, an astute investor might see the flaw in this statement. The Magnificent 7 stocks returned over 27% in 2025, as this graphic from Visual Capitalist shows, with Alphabet leading the charge with returns of over 65%, and Nvidia following with returns of close to 41%. If income investors had chosen to sit out all tech companies, they would have missed out on this high growth.
Covered Call ETFs – Consistent Income, Alongside Some Growth
As in most things in life, the best path is in the middle of both extremes, with a mix of both income and growth investing. What strategy an investor chooses depends on her financial goals, her risk tolerance and appetite, and her time horizon. However, there is an option that investors can consider getting both growth and income in their portfolios – Covered Call Exchange Traded Funds (ETFs).
Covered Call ETFs aim to generate income for investors through owning a portfolio of stocks and then selling call options on those stocks and collecting the option premiums which are paid out to investors as income.
Investors should note that a covered-call strategy in a strong bull market may underperform on a total-return basis as the premium income comes at the cost of some upside. But for many income investors, there is value in consistent monthly cash flow generated through option premiums, while still maintaining participation in a portion of the market’s upside.
As Harvest Portfolios’ President and Co-CIO Paul Macdonald explains, “Many systematic approaches lack the flexibility to adjust option coverage in response to market conditions. In contrast, more active strategies — such as ours — can write less when volatility and option premiums are high, helping to manage risk and sustain distributions. Ultimately, there is a trade-off inherent to covered calls: investors gain exposure to the underlying stocks but forgo some of the monthly upside in exchange for consistent income. Active management can help mitigate that foregone upside through selective writing and tactical flexibility.”
Low Volatility ETFs for Both Income and Growth
As we discussed in a column last year, if your financial goals are your ultimate destination, and the market is the road that gets you there, volatility could be considered potholes along the way, making your path bumpy and unenjoyable. Low volatility ETFs might help give you a smoother ride in an otherwise bumpy market. A low volatility strategy could give investors the benefits of equity investing, with fewer risks, by overweighting stocks in more stable sectors including Consumer Staples, Banks, and Utilities.
For investors who want the comfort of lower volatility, a fund to consider could be the Harvest Low Volatility Canadian Equity ETF, (TSX: HVOL). This fund offers a low volatility strategy for a smoother investment experience, holding 40 top Canadian equities, ranked and weighted by their risk score and market cap weight, with a 4% maximum weight per name. The portfolio’s Canadian equities are scored according to risk and fundamental metrics. Investors who want all of this, and also want regular cash distributions, could consider the Harvest Low Volatility Canadian Equity Income ETF, (TSX: HVOI), which offers the same portfolio as HVOL, but with an aim to generate high monthly cash distributions through a covered call strategy.
Harvest ETFs has a wide range of covered ETFs for investors of all stripes. You can find out more about covered calls here.
Disclaimer
This communication should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. The information is meant to provide general information for educational purposes. Tax, investment and all other decisions should be made with guidance from a qualified professional.
Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds managed by Harvest Portfolios Group Inc. (the “Funds”). Please read the relevant prospectus before investing. The Funds are not guaranteed, their values change frequently, and past performance may not be repeated. Distributions are paid to you in cash unless you request, pursuant to your participation in a distribution reinvestment plan, that they be reinvested into available Class units of the Fund you own. If a Fund earns less than the amounts distributed, the difference is a return of capital.
