Passive earnings math journeys up quite a lot of buyers. The same old strategy is to take a yield determine, whether or not that could be a trailing 12-month yield or a ahead estimate, and multiply it by your portfolio worth to “eyeball” how a lot earnings you’ll get.
The issue is that this isn’t very exact. Yields fluctuate, distributions change, and relying on how they’re calculated, they could not mirror what you’re really receiving in the present day.
A greater means is to work backwards. Begin with the newest distribution per share, determine what number of shares that you must hit your goal earnings, after which calculate how a lot capital that requires.
This course of turns into even easier inside a Tax-Free Financial savings Account (TFSA). Since there isn’t a tax drag, you do not want to regulate for after-tax earnings. What you see is what you get.
Right here is how that math works utilizing certainly one of my favorite Canadian earnings funds, the Canoe EIT Earnings Fund (TSX: EIT.UN).
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Begin with the earnings goal
In case your purpose is $500 per thirty days, step one is to take a look at the newest distribution. EIT.UN presently pays a hard and fast month-to-month distribution of $0.10 per share.
Now work backwards: $500 ÷ $0.10 = 5,000 shares. That’s the variety of shares required to generate $500 in month-to-month earnings.
Subsequent, multiply that by the present market value. As of April 6, 2026, the fund trades at $16.63 per share: 5,000 × $16.63 = $83,150
So, you would wish roughly $83,150 invested to generate $500 per thirty days in tax-free earnings inside a TFSA.
This strategy is way more dependable than counting on a yield share, as a result of it’s primarily based on the precise money payout you obtain.
How Canoe EIT Earnings Fund works
EIT.UN is structured as a closed-end fund relatively than an exchange-traded fund (ETF). It doesn’t repeatedly difficulty or redeem models. As a substitute, a hard and fast variety of models commerce in the marketplace, which implies the value can transfer above or under the underlying web asset worth.
As of April 6, 2026, the fund trades at $16.63 per unit in comparison with a web asset worth of $16.87, representing a slight low cost. It’s finest to all the time purchase at a reduction, and by no means at a premium.
The portfolio is actively managed and holds a concentrated mixture of Canadian and U.S. equities, roughly break up 50/50. The main target is on giant, established firms with sturdy earnings.
The fund also can use leverage, borrowing as much as 20% of its web asset worth. This may improve earnings and returns but additionally will increase danger throughout market downturns.
Lastly, charges are additionally greater than a typical index ETF, with a 1.1% base administration charge, reflecting its energetic strategy.
