Was also eyeing on the NEOS S&P 500 High Income ETF.
I have shortlisted JPMorgan ETFs (Ireland) ICAV - Nasdaq Equity Premium Income Active UCITS ETF, it has a decent dividend yield with NAV preservation and tax optimization as it is domiciled in Ireland.
The point about NAV erosion is so important. A double digit yield looks incredible on paper, but income means very little if your principal is quietly disappearing. Looking at total return alongside the distribution yield is a much better way to judge these funds.
Cain, I have been looking for a way to create a grantor’s trust to pass some estate to my kids outside of probate. I know you are not a tax attorney, but maybe others here would help out. I wanted to do something that was VERY low annual maintenance where I would not have to file a tax return each year for the trust. Or at least not have to liquidate to pay taxes. Will getting ETF’s that use ROC (return of capital) do this job for me? High quality investments, low NAV erosion, low annual tax issues (at least till they are sold by my kids later on).
Hey Jeff, in theory a return of capital distribution still requires taxes to be filed unfortunately, regardless of the actual classification of the distribution. Although I could be wrong, I don't think these funds would be a good fit for this scenario, especially since the classification of the payout can change at any time.
Good piece and I agree with the focus on avoiding blind yield chasing. With these ETFs the key test isn’t NAV in the CEF sense, it’s whether total return stacks up once you account for what you’re giving up. Option income doesn’t come for free. You’re trading upside and beta for cash flow. The real question is whether long-run total return plus distributions justifies that trade versus simply holding the index. That’s the part I’d want to see quantified.
I invested in MLPI and CHPY in my Roth 401k brokerage account. I’m also looking at LFGY and the other two you mention here. Any thoughts on LFGY? I’m already very happy with MLPI as well as CHPY. Thanks!
Glad they've worked out for you! It's tough because LFGY really depends on the bull cycle starting again from crypto. It's hard to get that ticking right. I fear there's still a risk that crypto sees another pull back and it'll take LFGY a little lower!
Keeping an eye on it tho! Soon as we see crypto rally that's the time to enter in my opinion
Most people see a double-digit yield and completely blind-buy into a total principal trap.
I used to do the same until I got tired of watching my capital melt away just to chase a fat monthly check.
Now, I stick to a quick 3-step rule to avoid the options drag:
find an absolute beast of an underlying asset, make sure they cap option writing at 30-50% max so you actually get some upside breathing room, and look for a tiny bit of leverage to buy the dip when the market takes a dive.
I’ve been tracking how funds like PAYG and EQCL, USCL, MSTE... handle this mechanics-wise.🛠️
Building the Cash Flow MachineI actually just mapped out this exact strategy and how these ETFs heal their NAV over on my Substack:
@cashflowlivingstandards
Out of the ones you listed, how do you think SPYI holds up if the market just goes sideways?
. Feel free to eyeball the framework if you want to avoid the yield traps!Out of the ones you listed, how do you think SPYI holds up if the market just goes sideways?
really liking the NEOs funds. Currently have SPYI & QQQI as my core! Looking into adding MLPI
They're holding up really great. And I love the tax efficiency!
Just watch them, NEOs were purchased by Goldman so they could make changes. Currently the NEOs team is still overseeing them as normal.
Thanks for the insightful article !
Was also eyeing on the NEOS S&P 500 High Income ETF.
I have shortlisted JPMorgan ETFs (Ireland) ICAV - Nasdaq Equity Premium Income Active UCITS ETF, it has a decent dividend yield with NAV preservation and tax optimization as it is domiciled in Ireland.
The point about NAV erosion is so important. A double digit yield looks incredible on paper, but income means very little if your principal is quietly disappearing. Looking at total return alongside the distribution yield is a much better way to judge these funds.
Exactly! Appreciate the comment!
Cain, I have been looking for a way to create a grantor’s trust to pass some estate to my kids outside of probate. I know you are not a tax attorney, but maybe others here would help out. I wanted to do something that was VERY low annual maintenance where I would not have to file a tax return each year for the trust. Or at least not have to liquidate to pay taxes. Will getting ETF’s that use ROC (return of capital) do this job for me? High quality investments, low NAV erosion, low annual tax issues (at least till they are sold by my kids later on).
Hey Jeff, in theory a return of capital distribution still requires taxes to be filed unfortunately, regardless of the actual classification of the distribution. Although I could be wrong, I don't think these funds would be a good fit for this scenario, especially since the classification of the payout can change at any time.
Good piece and I agree with the focus on avoiding blind yield chasing. With these ETFs the key test isn’t NAV in the CEF sense, it’s whether total return stacks up once you account for what you’re giving up. Option income doesn’t come for free. You’re trading upside and beta for cash flow. The real question is whether long-run total return plus distributions justifies that trade versus simply holding the index. That’s the part I’d want to see quantified.
I invested in MLPI and CHPY in my Roth 401k brokerage account. I’m also looking at LFGY and the other two you mention here. Any thoughts on LFGY? I’m already very happy with MLPI as well as CHPY. Thanks!
Glad they've worked out for you! It's tough because LFGY really depends on the bull cycle starting again from crypto. It's hard to get that ticking right. I fear there's still a risk that crypto sees another pull back and it'll take LFGY a little lower!
Keeping an eye on it tho! Soon as we see crypto rally that's the time to enter in my opinion
Awesome. I appreciate the feedback and the perspective! Let’s keep an eye on it and watch for that crypto rally!
Great breakdown!
Most people see a double-digit yield and completely blind-buy into a total principal trap.
I used to do the same until I got tired of watching my capital melt away just to chase a fat monthly check.
Now, I stick to a quick 3-step rule to avoid the options drag:
find an absolute beast of an underlying asset, make sure they cap option writing at 30-50% max so you actually get some upside breathing room, and look for a tiny bit of leverage to buy the dip when the market takes a dive.
I’ve been tracking how funds like PAYG and EQCL, USCL, MSTE... handle this mechanics-wise.🛠️
Building the Cash Flow MachineI actually just mapped out this exact strategy and how these ETFs heal their NAV over on my Substack:
@cashflowlivingstandards
Out of the ones you listed, how do you think SPYI holds up if the market just goes sideways?
. Feel free to eyeball the framework if you want to avoid the yield traps!Out of the ones you listed, how do you think SPYI holds up if the market just goes sideways?