If you’re avoiding high yield ETFs it’s because you worry about nav erosion. If you’re in them your biggest concern is still nav erosion. Here’s the funds that won’t erode no matter where you buy them. 🧵👇 Also funds that won’t erode depending on your entry. Avoiding erosion is a two front thing. Both factors need to check the box. The underlying needs to be bullish longterm. The highest certainty of that comes from the indexes. The strategy needs to also check multiple boxes. You need a strategy that avoids heavy upside cap. Heavy upside cap means you get all the downside of the underlying with limited upside. That created a chart that perpetually erodes. You want far out of the money covered calls or put spreads. If a fund is selling near the money covered calls for 60% yield… you’re going to have erosion unless the underlying goes parabolic. So what checks those boxes? $GPIQ & $GPIX track $QQQ & the S&P. They pay a modest 9-10.5% yield but get some of the highest nav growth in the space. That also leads to dividend growth. $OVL is 99% long $VOO. The 1% is collateral for put spreads. That means no capped upside with the 10.28% yield. It also has a near 7 year track record of beating the S&P. $QQQI & $SPYI sell monthly far out of the money covered calls on only a portion of the holding. Coming in at 14 & 12% yield they now have years of nav stable track record. Now here’s the problem people run into. They assume you can buy these tier two funds below at any price. To maintain nav health you need to time entries. That’s my bread and butter but here’s the thing. You don’t have to do that to have success. If you want to set and forget just stick to tier one funds. For tier two think funds like $CHPY$BLOX & $GIAX. With the correct buy points you end up nav green harvesting 24-40% yield. That’s an absolute game changer. Two people who buy the same fund can have two very different outcomes. That all depends on your entry point. Risk to reward is crucial here whereas the basic indexes can be bought at any price. This is why you need a plan and know what bucket each fund falls in. If you want pure set and forget stick to tier one. If you want a hybrid mix both tiers with the understanding that it will require active management.
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Scott S@scottsinvesting · 5h
I'm not going to respond to all, but I completely disagree that $OVL's NAV "won't erode no matter where you buy them". I won't bother listing all the reasons why, but if you're interested simply search "risks of OVL ETF in multi-year secular bear market" and it'll show how/why the NAV is permanently at risk.
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