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Excellent work. You actually know / understand all this stuff. You are also able to express it such that a regular person will understand, the difference between. The YLD funds from the JEP funds. Full Respect to you.
BlackRock is the biggest asset manager in the world and I'm a fan of their BST fund (video coming out soon). I'm not familiar with the funds you listed...they have so many! I'll take a look, thanks.
Since this video, QYLD analyst/manager has done interviews to announced some changes in their overall methodology and provided clarity on their mandate. There's an interview with RUclipsr "Passive Income Investing". I came to a couple of my own conclusions: the opening price for QYLD was too high, the current price is more inline with it's trading methodology, I see this ETF as an high dividend product akin to corporate bonds but its trading in the NASDAQ, for my long term monthly income.
I watch the Canadian "Passive Income Investing" channel sometimes. Which video are you referring to? He doesn't use any titles so it's difficult to identify his videos! Was it this one? ruclips.net/video/XKYOGD4Bppo/видео.html If there's a significant change since I made my video I'd like to learn more about it. I just checked their website and the fund still sells "at the money calls on 100% of their portfolio"...which is my fundamental criticism of the fund. The distributions are good, but I don't think that over the long term they adequately compensate for the fund's assets being exposed to all the downside of the market and none of the upside. If you look at total returns over the past year, QYLD should have ridden a nice tech bounce, but it didn't. The other major tech funds and indexes left it for dead.
I just watched the video, thank you. I didn't know they changed their distribution policy and now redirect some of the option income back into the assets of the fund. This will reduce NAV erosion but it doesn't change my negative outlook on the fund because the change is neutral. The effects of this new policy will be that NAV goes up and distributions go down (by an equal amount). The change is a good idea because it reduces the negative effect of investors who spend 100% of the distributions and then suffer a loss of NAV. However, it doesn't change the fundamental flaw of the strategy, which is that writing at the money calls on 100% of the fund creates more downside than upside. The NAV will still erode as the addition of the income from the distributions most likely doesn't exceed the loss created during large market corrections. As the Global X representative pointed out, QYLD is for investors who anticipate a sideways market...nobody knows when that will happen! Glad I watched the video; always good to learn something.
@@armchairincomechannel After more research I agree that QYLD investing isn't a good long term strategy. I fear a bust for QYLD investors will come a few years from now.
@@armchairincomechannel The Qyld has two big advantages: 1 You are getting the money without need to sale! 2 Every month stability, you are getting 1% yield to your bank account Qyld is investing for a life time, when you understand this simple rule, you don't care about the current price which will go up and down.
I follow your motivation to receive steady income, I want that too! But I don't want my principal to erode over time. If QYLD has eroded 30% already, over a lifetime the loss will be considerably more! More importantly, alternatives like JEPQ and BST (the subject of a future video) offer high monthly income without eroding your principal over the long term. They also offer the potential to capture a large percentage of the NASDAQ returns.
You would not be receiving income. The portion going to QQQ would grow and the portion allocated to QYLD would be shrinking. You would earn a higher return just holding QQQ.
@@armchairincomechannel I'd be interested if you reinvested the dividends in TQQQ. That way you potentially have a steady original holding and potential for higher growth than just QQQ.
@@armchairincomechannel if you invest your lump sum into qyld and reinvest the distribution into tqqq, it outperforms compared to if you just put it all in qqq from day one. Food for thought...
Hi, I don't endorse or own either but I use QQQ sometimes as a benchmark, just because it's popular. As for performance, I agree, VGT outperforms QQQ over the long term and charges a lower fee.
Wow, interesting how the index it follows is not the index we all thought it followed. But yeah, as you pointed out, what really kills this fund is the ATM calls. This is a TERRIBLE strategy with an incredibly volatile index that zooms up and down. You capture all of the downside, but you don't capture any, ANY of the upside. This leads directly to the price decay of QYLD over time. Worse, when you buy QYLD at $21, and then it crashes down to $16, your dividends take that hit, too. This is because the fund specifically caps the monthly dividend at 1% of the NAV. So instead of getting 21 cents a share, you get 16 cents a share. Oof. (Don't ask me how I know. Double oof.)
Hi, thanks for your detailed feedback. I looked for a trend in the dividends but couldn't see a pattern. For example, I thought they would gradually fall at the same rate as the fund price, but they haven't. Regardless, option premiums are a function of the price of the underlying stock/fund so they should follow the behavior you described.
Agreed. But the loss of principal shouldn't be ignored. JEPQ is primarily for income and it outperforms QYLD. QQQI and GPIQ will probably outperform it too.
QYLD is up from $15 to $16.92. At any rate, this is not an investment tool. It is an income tool for old people. Does a senior really want to sell Vanguard index fund shares that are beaten down in a bear market while collecting 1.4% dividends? No. With QYLD, you get 1% of your principal every month.
QYLD isn't supposed to outperform or even keep up with QQQ, but its composition is a derivative of the NASDAQ 100 so it will always be part of the discussion. I agree that they aren't direct competitors. However, it's a tech focused income fund, so people are going to compare it to other tech focused income funds. If you want to compare it to fixed income, that's your decision, I wish you well.
@@armchairincomechannel You are misleading the viewers. QYLD is for current income, not to be compared with QQQ or equity return. You are comparing apples to oranges
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Excellent work. You actually know / understand all this stuff. You are also able to express it such that a regular person will understand, the difference between. The YLD funds from the JEP funds. Full Respect to you.
Thanks for your kinds words and for watching the video. I promise to anybody reading this that I didn't pay Norman to write such a nice comment :)
@Armchair Income TLTW HYGW LQDW is Blackrock good at this also ? I always heard we should have some Bonds in our portfolio ?
BlackRock is the biggest asset manager in the world and I'm a fan of their BST fund (video coming out soon). I'm not familiar with the funds you listed...they have so many! I'll take a look, thanks.
Nice one mate, thought about buying a few times, glad I did not.
Glad you found it useful.
Thank you! Excellent guidance and analysis. Very helpful and timely.
You're very welcome! I’m glad you found it useful 😀
Great video. Thank you. 👏
Glad you liked it! I appreciate the feedback.
Really good analysis! Thanks
Glad you liked it!
Nice work breaking it all down for us. I don’t think this one is for me.
Cheers, see you in the next one.
Thanks for watching 😀
Since this video, QYLD analyst/manager has done interviews to announced some changes in their overall methodology and provided clarity on their mandate. There's an interview with RUclipsr "Passive Income Investing". I came to a couple of my own conclusions: the opening price for QYLD was too high, the current price is more inline with it's trading methodology, I see this ETF as an high dividend product akin to corporate bonds but its trading in the NASDAQ, for my long term monthly income.
I watch the Canadian "Passive Income Investing" channel sometimes. Which video are you referring to? He doesn't use any titles so it's difficult to identify his videos! Was it this one?
ruclips.net/video/XKYOGD4Bppo/видео.html
If there's a significant change since I made my video I'd like to learn more about it. I just checked their website and the fund still sells "at the money calls on 100% of their portfolio"...which is my fundamental criticism of the fund. The distributions are good, but I don't think that over the long term they adequately compensate for the fund's assets being exposed to all the downside of the market and none of the upside. If you look at total returns over the past year, QYLD should have ridden a nice tech bounce, but it didn't. The other major tech funds and indexes left it for dead.
@@armchairincomechannel 1 month ago "Q&A with Global X, Covered Call Strategy, Distribution Policy, NAV Erosion"
Thanks! The titles on his channel are now visible, must have been a glitch. I'll check out the video, and thanks again for the suggestion.
I just watched the video, thank you. I didn't know they changed their distribution policy and now redirect some of the option income back into the assets of the fund. This will reduce NAV erosion but it doesn't change my negative outlook on the fund because the change is neutral. The effects of this new policy will be that NAV goes up and distributions go down (by an equal amount). The change is a good idea because it reduces the negative effect of investors who spend 100% of the distributions and then suffer a loss of NAV. However, it doesn't change the fundamental flaw of the strategy, which is that writing at the money calls on 100% of the fund creates more downside than upside. The NAV will still erode as the addition of the income from the distributions most likely doesn't exceed the loss created during large market corrections. As the Global X representative pointed out, QYLD is for investors who anticipate a sideways market...nobody knows when that will happen! Glad I watched the video; always good to learn something.
@@armchairincomechannel After more research I agree that QYLD investing isn't a good long term strategy. I fear a bust for QYLD investors will come a few years from now.
Is there a way to understand how much OTM a fund manager is selling the option?
Only if they post their trades. Some funds do but its not common.
@@armchairincomechannel I mean as a general rule of conduct.. I would love to but a covered call etf with an OTM strategy in place!
SPYI, JEPI, and JEPQ all use OTM covered call strategies and I have videos available for each of those :)
I totally agree with your numbers but disagree with your conclusions
But anyway good review
Thanks for your feedback. I'm curious...what are your conclusions?
@@armchairincomechannel The Qyld has two big advantages:
1 You are getting the money without need to sale!
2 Every month stability, you are getting 1% yield to your bank account
Qyld is investing for a life time, when you understand this simple rule, you don't care about the current price which will go up and down.
I follow your motivation to receive steady income, I want that too! But I don't want my principal to erode over time. If QYLD has eroded 30% already, over a lifetime the loss will be considerably more! More importantly, alternatives like JEPQ and BST (the subject of a future video) offer high monthly income without eroding your principal over the long term. They also offer the potential to capture a large percentage of the NASDAQ returns.
High fees and low returns. What's not to like? Thanks for the deep dive on this one.
Exactly! You summed it up better than I did 😃
What if you put the dividends into QQQ? What would the end up with?
You would not be receiving income. The portion going to QQQ would grow and the portion allocated to QYLD would be shrinking. You would earn a higher return just holding QQQ.
@@armchairincomechannel I'd be interested if you reinvested the dividends in TQQQ. That way you potentially have a steady original holding and potential for higher growth than just QQQ.
@@armchairincomechannel if you invest your lump sum into qyld and reinvest the distribution into tqqq, it outperforms compared to if you just put it all in qqq from day one. Food for thought...
Thanks for your suggestion :)
VGT outperforms QQQ yet people keep endorsing QQQ.
Hi, I don't endorse or own either but I use QQQ sometimes as a benchmark, just because it's popular. As for performance, I agree, VGT outperforms QQQ over the long term and charges a lower fee.
Wow, interesting how the index it follows is not the index we all thought it followed. But yeah, as you pointed out, what really kills this fund is the ATM calls. This is a TERRIBLE strategy with an incredibly volatile index that zooms up and down. You capture all of the downside, but you don't capture any, ANY of the upside. This leads directly to the price decay of QYLD over time. Worse, when you buy QYLD at $21, and then it crashes down to $16, your dividends take that hit, too. This is because the fund specifically caps the monthly dividend at 1% of the NAV. So instead of getting 21 cents a share, you get 16 cents a share. Oof. (Don't ask me how I know. Double oof.)
Hi, thanks for your detailed feedback. I looked for a trend in the dividends but couldn't see a pattern. For example, I thought they would gradually fall at the same rate as the fund price, but they haven't. Regardless, option premiums are a function of the price of the underlying stock/fund so they should follow the behavior you described.
Qyld is a income fund for cash flow. Not a growth stock
Agreed. But the loss of principal shouldn't be ignored. JEPQ is primarily for income and it outperforms QYLD. QQQI and GPIQ will probably outperform it too.
QYLD is up from $15 to $16.92. At any rate, this is not an investment tool. It is an income tool for old people. Does a senior really want to sell Vanguard index fund shares that are beaten down in a bear market while collecting 1.4% dividends? No. With QYLD, you get 1% of your principal every month.
I agree but I think there are other income tools that offer better performance than QYLD.
DO NOT Compare QYLD with Equities QQQ. Compare it with fixed income. APPLES TO APPLES ONLY.
QYLD isn't supposed to outperform or even keep up with QQQ, but its composition is a derivative of the NASDAQ 100 so it will always be part of the discussion. I agree that they aren't direct competitors. However, it's a tech focused income fund, so people are going to compare it to other tech focused income funds. If you want to compare it to fixed income, that's your decision, I wish you well.
@@armchairincomechannel You are misleading the viewers. QYLD is for current income, not to be compared with QQQ or equity return. You are comparing apples to oranges