I've been talking to growth investors about the whole viability and lack of asset growth issue they have with Covered Call ETFs. I may be over simplifying this problem they have, but it struck me this morning 🌄 that this seems to be a mathematical issue, AND why? The growth investor has one thing on their mind when choosing their stocks - they want the greatest potential to grow in value because they have that almighty end date of retirement when the ACCUMULATION phase ends and the DECUMULATION phase begins! This pushes them to need their portfolio to grow in the most optimal way so that it is worth the most that it possibly can be when reaching this transitional stage. (Captain Obvious, right? 😄🤪) So when they're watching us buying these ETFs that are known to cap their upside, they're pulling out their hair in frustration and confusion! Right? The secret to our "insanity" they cannot comprehend is that an income investor NEVER reaches the DECUMULATION phase. I'll let that sink in..... We won't be selling our ETFs to fund our retirement....... Does that make sense yet? While you are selling your stocks to live off those well-earned investments, the income investor is NOT SELLING - they simply keep living off the quarterly/monthly/weekly distributions and reinvesting what's left over. Does THAT make sense? We DON'T need to maximize our NAV, our PORTFOLIO, our ETF PRICE, because we WILL NEVER SELL THEM. That's the difference. We'll all be retiring one day, but the money received from our portfolios will be from different sources. I wish you all luck in your chosen investing strategy 👍😊🤑💰
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147 Comments
Christopher J
@cjs033 · 1yr
Makes sense to me! My portfolio is down approximately 25K this month alone but it doesn’t concern me in the least. In fact, I’m actually excited that I get to spend my 10K monthly distributions on cheaper shares, thereby increasing my share count, and monthly distributions. If I was a pure growth investor, I’d be freaking out right about now. And September won’t be any better for them either.
Abdul Salam Basit
@asbasit · 1yr
Interesting perspective, Kyle! I think this really comes down to investor goals — growth investors want to maximize long-term NAV before decumulation, while income investors want consistent distributions so they don’t need to sell. The challenge, as Drew pointed out, is whether those distributions remain reliable over decades. Maybe the sweet spot is balancing some income ETFs with growth exposure, so you’re not capped on one side or overly exposed on the other. Just to add my 2¢ here — one approach could be to focus on maximum growth through high-growth instruments while you’re still far from retirement, then gradually shift into higher-yield income stocks or covered call ETFs closer to retirement. That way, you get the benefit of compounding and portfolio appreciation early on, but also secure steady distributions when you need consistent income.
Zakaria Lazaar@jackgrimes · 1yr
I have the most straight and simple answer: When most of us (Growth) reach retirement or FIRE, we will switch to Dividend Stocks/ETFs 🤯🤓
Kyle T@kyletfreedom58 · 1yr
I'll add here as well that for the sake of clarity and so that I didn't write a novel, I didn't touch on all the various scenarios, but stuck with defining the main difference between the two strategies. I also never said that one is better than another - I leave that to the trolls 😉 All you commenters (with a couple exceptions) are clever and helpful enough to have filled in the gaps that I left. Here's to the mature people of Blossom! 👍🫡😊
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