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Sorry, that's not the right fund. But there are some more expensive alternatives
RELATED: Understanding capital gains distributionsIf your goal is to take $3,000 per month from your holding in HXT, your only option would be to sell some shares every time you need cash. On every sale you will realize a capital gain or loss, depending how the price of the fund has changed since you purchased it. At the end of the year, you’ll need to report the net gain or loss and pay the appropriate amount of tax. So if your goal is to defer taxes rather than paying them every year, this is not the way to do it. If you want a simple solution for generating tax-efficient cash flow, you might consider one of the many monthly income funds offered by the big banks. These are diversified mutual funds, usually contain a mix of bonds and dividend-paying stocks, that pay out a fixed amount each month. In most cases, this payout is more than the interest and dividends generated by the investments, and the excess is considered return of capital. For example, a monthly income fund might target a 7% annual distribution, and this might be made up of 1% interest, 2% in dividends and a top-up of 4% in return of capital. On a $500,000 investment, a 7% distribution would be just shy of $3,000 a month. Just be aware that generous distributions like this may not be sustainable. They may be appropriate if you are planning to draw down the fund over a finite period, but a 7% withdrawal may result in the depletion of your capital over the longer term. Note also that many monthly income mutual funds carry high fees that can eat up a big chunk of the interest and dividends. MORE ABOUT ASK AN INVESTMENT EXPERT:
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I was expecting you to mention a life-insurance-based annuity. These can be used to generate the kind of monthly payments the asker is looking for, guaranteed by the insurance company. They also have the advantage that when the annuitant dies, any remaining funds in the contract pass directly to the beneficiary – unlike mutual funds that require the payment of fees and taxes unless transferred to a spouse at death. There are different kinds, so he would need to seek the advice of a licensed Life Insurance Advisor.