The HONEST TRUTH about “LIVING OFF '' High Yield Covered Call ETFs QQQY JEPY TSLY Is it Feasible?
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00:00 Intro
01:21 "Living off Dividends"
03:32 Risk Levels
04:31 JEPQ/QQQY Example
08:30 Is is Feasible?
MISSION:
Help everyday people to invest on their own, in order to create their own source of Passive Income to enhance their quality of life and reach Financial Independence
GOALS of this Channel:
1) To share my Personal Investing Journey & Strategy with the world. Everybody needs to make their own investing decisions. I am NOT against any style of investing and I will NEVER claim my Investing strategy is the “best”; its the best FOR ME
2) Educate you about Income Oriented Investing with a particular focus on Covered Call ETFs listed on the Canadian & U.S. Stock Markets
DISCLAIMER:
The videos and opinions on this channel are for informational and educational purposes only and do not constitute investment advice. Adriano Starinieri is not registered to provide investment advice and as such does not provide recommendations - those looking for investment advice should seek out a registered professional. Adriano is not responsible for investment actions taken by viewers.
#passiveincome #investing #dividendincome #financialfreedom #livingoffdividends #covered call #high yield #income
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You need to plan for a buffer. So if you need 5 grand/month, plan for at least 8-9 grand/month. Portfolio sizing and asset mix is also important.
that gives me peace of mind, thanks for being pragmatic.
I have 3000 shares of QYLD. Monthly distributions are enough to pay my homeowners insurance, windstorm insurance, and property taxes. And because of my tax bracket, it's not a tax burden. Life is good!
The way I see these high yield funds are income enhancer. It helps to build core and more stable positions, which will generate an income to live off.
Bingo
Same thinking, I use this gorgeous dividends to buy more high quality dividend growth stocks, buy after the ex-date is good method!~
I use the premium dividend from tsly to buy growth/ div stocks for the future
Thanks for keeping it real! You really need to understand these high yielding funds, watch how it works when the market goes up and down. I am hoping to retire in a year or 2 so I am really testing different scenarios with these funds vs the high yielders. Agree... always reinvest some of your divi's! Love your videos.
I dont see it as living off one high yield etf. You should build a portfolio with a mix of lower yielding more stable distributions and higher yield with generates large monthly cash to the portfolio. Then decide how much your lifestyle needs and make sure your portfolio generates like 50% 100% more than you need each month. If the high yielding etfs deliver then reinvest back into your portfolio the excess. If they have a lower distribution month then you are covered to pay your monthly needs. :)
But living only off the high yields... too risky unless as said they are producing far more than you need each month.
If you plane to invest or buy 1,000 shares of these high dividend ETF's I suggest buy in with 200 shares each month for the next 5 months. This way you cost average down and take advantage of the higher volitility in these hi-div ETF's...just a thought.
The dividends are great. Made $6300 from the latest dividends. But opted to sell all Yieldmax and Defiance ETF's due to the price per share depletion. I took my money and bought Berkshire Hathaway class B shares.
I did the same a while ago...
sure! that's could work. your experience made you switch your strategy. its all about doing whats best for YOU
Always great information. Thanks!
So, what will the NAV and distribution rate of one of these high yielding funds look like 5-10 years down the road?
lower but again, you need to understand how the fund works and look at total returns
@@PassiveIncomeInvesting This is how TSLY is working for me right now.
I'm down $2532 with TSLY. If distributions remain the same $.56 at the end of the year my 600 shares will yield $4032 which gives my a plus of only $1500. That's not great and that's only in the stock doesn't go lower.
Hoping that it will go up seems like a bad strategy right now.
Well said !
I like the way your videos describe situations so clearly.
Thanks for another informative video❤
Honestly, your best video to date.
ETF that give 10%-20% is the optimum strategy. For myself, I'm transitioning from having 40% of my portfolio from fixed bonds. Less than 6 months left before maturity.
I'm not sure Yieldmax aee the best kind of funds to live off. However I looked at other funds like EIT, encc hyld etc. what it seems like us you can use the dividends but to keep up with inflation and replace the income you take you shouldn't take more than 50% of any individual fund's dividends for that month, then reinvest the rest. As long as you own the shares you will still get paid.
Not sure about all of you but I am now parking my investments in closed end funds which have 30+ year records of dividends. Yeah 0 or low dividend growth but 2024 is starting off really iffy. HYT, BST, etc.
EIT
Good video. Definitely one needs an investment plan with diversity. This plan is different depending on age, as a big difference between when I was 42 to being 62. Many other factors to consider.
Very beneficial video. I've been playing with QQQY, KLIP, TSLY, AIYY, etc. in my IRA. I am still to young to draw from it so I am able to see the benefits of a high yield and I use that to reinvest. However, in my personal account, I have to consider my tax rate plus the reinvestment. I just sold my house and was considering using that and these funds to create an income stream. But between the dividend and my income, half of the dividend will be consumed by taxes. The other half will need to be reinvested. So I'm netting zero percent. The 10-15 pct ETFs would be better in this case because the taxes would be lower. I'm still running the numbers but it appears that in my case, these higher yield funds are better to use in my IRA and not my personal account.
It's pointless in your IRA, as you can't use the income, so you may as well be in a growth stock or etf, not an income etf. Income etfs are for income. They belong in an account you can take money from monthly.
That’s not necessarily true. Let’s say you max out your Roth IRA every year - this is a good way to continue to generate income on a monthly basis over that limit which is causing your account to continue to grow. Also making/earning money passively is never a bad option even if you have to wait until retirement to use it. Once retired most people will buy into these funds for income so imagine the position he will have in the future if he starts chipping away at it now.
Thank You !
Makes sense and very informative 👍…
This is specific to those 3 stocks only and not to PII total yield because price entry will also count in the analysis if we talk about hold 4ever and CC etfs. also, my DFN capital when i bought it around $4 is well above NAV so I can continue enjoying my 28% income from it and just create a price alert when to swap or increase position.
you have a dividend of 28%?
Well said, thanks for sharing Adrianno. Understanding fund construction is paramount.
So, if I am going to drip my funds for three years in my RRSP is it better to drip the high income funds or the 10% yielding funds? Or are they relatively the same in the end?
Good points. A valuable perspective.
Thanks for watching!
I do not believe in spending all investment proceeds received-- in any type of fund or investment strategy. Income can vary greatly from month to month. You need to invest enough to have a nice buffer for your needs. I currently live off my PII Portfolio and live below my monthly income. I reinvest the rest so I can give myself a raise if I want one. I think it is also important to have money on the sidelines as you are reinvesting a portion of your proceeds. This way, you can more efficiently plan and live BEHIND the income you receive. Reinvest a portion of the proceeds, fill the money bucket with the rest, withdraw a portion from the money bucket, periodically, to live on. Repeat the process.
well done! i love hearing from people who have figured out their own plan
Got out of global x qyld and ryld when i broke even. Only holding svol right now.
Svol will bleed on a crash
@@Snappingttturtlle got limit order to sell for that.
Tone is changing!!!
what are you talking about? care to elaborate
I expect to use my dividends to supplement the govt retirement benefits :)
Total return is what matters... dividend is part of total return. You have to take into account the capital appreciation/depreciation. The risk adjusted total return over enough time of these high yielders is usually below investing in sp500... long term. So you may think you get the best out of your money but... you're in fact leaving money on the table... do your maths guys... living off dividend is usually just a mind trick... getting 11% return from sp500 or getting 11% total return from high yielders is getting the exact same thing except that for sp500 you sell shares and pay capital gains and for high yielders, you pay dividend taxes which may or may not be the best thing...
well said . total return is what matters, but other things do it, like time and energy. as well as quality of life. i would not say its a "trick" its just an alternative way to invest instead of the "draw down" strategy which you described . one adv. is you can reach FIRE quicker.
@@PassiveIncomeInvesting I've got about 60 div. yielding positions among them are a number that provide 10% and above yields with stable stock prices. TRMD my best with a 20% yield and a stock price that has increased $10 per share since purchase. Not so impressed right now with yield max. Three of the yield max ETFs that I have, qqqy, cony and tsly, are not doing well in comparison. AMDY however is holding up well.
S&P 500 may be more yield in the end but after you start your retirement it will be harder to balance. I imagine most people will want to just get paid automatically every month.
I think S&P until it's time to retire then dump it into 2 to 3 solid dividend ETFs is a great idea.
Good to know, dude!!!
I currently have 10 ETFs in my Roth IRA. I don't want the expense ratio to be too high, and I don't want anything that is in a down trend. I like to see when the price has dropped, it sprang back and now trends within the same price range. All my ETFs have a 11% yield or higher and pay monthly. I do not have QQQY as one of my investments because it has been trending down since inspection. If the price finally stabilizes and trends neutral, I will add it.
it wont, because it gives out huge income. you gotta factor it in and look at the total returns, not stock prices
@@PassiveIncomeInvestingwhat happens if it keeps going down until it’s 0, what will happen to the monthly distributions?
Thanks Adrian for the nice example of how to hold these high yield funds! I guess these high yield funds are turning PI into AI (Active Investing).
Personally, I love to manage the redistribution of the yield myself. The key takeaway is do not take the entire yield out and spend it all! The yield needs to be reinvested back into the fund or something else. One more reason to hold it under the RRSP account which can prevent people from spending the yield right away.
The question is, how much of the yield is ROC (Return of Capital)?
AI (Active Investing). Its heading in that direction for sure.
4% rule has changed to the 10-15% rule. Nice :)
lol it depends which funds and it depends on your lifestyle and preference . 10-15% is really my opinion. many will disagree. like i said knowing how a fund works is key also
Still remember when mornigstar 5* fund CLM was your CORE fund and one fine day it was not even finding a space in your portfolio…
yea i got rid of it for a very specific reason and made a video entirely explaining that
@@PassiveIncomeInvesting i bought CLM just few days prior to that your CLM exit video 🙂…. Anyhow by the way, did you see how (when almost everything is loosing nav) QQQY is still holding up well and green…. Looks like thats the way to go forward
In the examples put forth what you are implying is it is necessary to reinvest the dividends to avoid or mitigate decay in share price value. Since this is most likely going to be in a taxable brokerage account you would be setting yourself up to get taxed on income-most of which you are reinvesting to slow down the decay of your position value. Why go to all that trouble rather than just stick with a JEPQ or SPYI which has less possibility of principal reduction?
yes i agree, it is less "trouble"
"Why go to all that trouble rather than just stick with a JEPQ or SPYI which has less possibility of principal reduction". I'm asking the same thing regarding my portfolio. QQQY, TSLY, CONY not looking so good right now.
What's your take on FEPI?
i like it!
I bought a ton of FTN a while back with a yield of around 23%. It consists of financials in Canada and US. It somewhat recovered with the financials and yields around 20%. I'm using it to pay off all my bills and eventually will DCA. Seems to be working mow?
the fact that you have a plan that's working well for you is all that matters. (and makes me happy)
This is kinda my plan for Canoe EIT, HDIF, ENCC and a few more. I want to get it to a point where I’m receiving a few hundred from each and when I’m ready to retire I will just stop DRIP and enjoy the returns.
I don’t need much, no mortgage, don’t smoke don’t drink, no experience habits besides a bit outdoors and coffee 😂
solid!
@@PassiveIncomeInvesting YTSL is next on my list, any suggestions?
If the distribution rate is 60%, couldn't you just use 40% of that distribution as monthly income and reinvest the other 60% to reduce the NAV erosion?
yes
I have been a trader for a long time and i know/understand very well that even the best of the best traders struggle to make 3-4% income safely and consistently…. If one can do it, big big firm’s won’t let ghat trader go at any cost….. thats why i was little suspicious of these high-yielders unless they are actually returning capital back to its investors…. Its just not easy/practical to safely deduct 3-5% every month from trading and distribute… my 0.02
well its not really trading. its writing call options to generate premiums to distribute . the important thing to to understand the fund
Can someone share their experience with the Inner circle or other paid products? Any alpha? Thanks!
the second video in the description explains it. but why not try it for 1 month to see? its 3 bucks :)
Remember dividends are taxable events. That complicates things greatly unless you are in a tax free account.
it can, and it might not. depends on province, tax bracket. RRSP contributions
Always wanted to hear this from you :)
Thanks Adriano! I’m sure many young folk didn’t understand this so now people can have a more sustainable approach!
Great points man! JEPQ and QQQY are basically the same. So many people don't understand this fact. Great video!
Well one follows the S & P 500 and the other tracks the Nasdaq 100. Not the same at all.
@@brahmmauer7437JEPI follows SP500. JEPQ is NASDAQ100.
@@brahmmauer7437 Neither follows the S&P
@@brahmmauer7437Jepi is the one that follows s&p, jepq follows QQQ.
Does this go for etfs like HYLD, HDIV, ENCC? That they will have continous NAV errosion?
as mentioned in the video, its really related to VERY HIGH Yield ETFs 30 40 50%+ Yields
When will you talk about YMAX launched yesterday?
im meeting with Jay soon to discuss. i figure ill wait until i talk to the man himself
cashing out divi off of qqqy or jepy is a race to zero. however you can use jepi and jepq for monthly income. jepy and qqqy will underperform jepi and jepq in longterm even with divi reinvested. why??? cuz jepi and jepq actuall own the stock they write covered call on. one more thing important to mention is how much of the jepy and qqqy divi is return of capitol. they do that to keep divi high but dilute share price in the mean time. there is lot of smoke and mirror with yieldmaxes and defiances. i would stick with jepi or jepq and add BALI to mix
Adrian seems you are saying that if you want to extract all the dividends each month you should invest in the JEPI and JEPQ type funds. Why would anyone want to do all the work of figuring out percentages of the QQQY or JEPY. Makes more sense to just hold the JPMorgan funds. Am I missing something?
Thanks.
no you are not, ill just add that you CAN "LIVE OFF ANYTHING" but it depends how you define that and how much work you want to put in.
Thanks.
Todays words are very different from over years ago…. I guess its words of wisdom now based on experience….
Your way too kind.
you will have to elaborate.... and also. did these really HIGH Yield funds exist years ago? no they didn't. so im not sure what you're talking about
Isn't it the INTENT of the fund to have a return that approximates its distribution? In other words: Why would any fund company start an ETF with the INTENTION of eroding its NAV to $0? Granted, we don't have enough history yet, but... in your opinion, are the total returns from 0DTE strategies going to beat the returns from traditional covered calls?
no.... returns and distribution rates are not the same at all. i think the returns will be very similar between all these funds with the same underlying
Excellent présentation! When are you jumping on YMAX ? 😎😎
If historically total perofrmance including dividends is much higher for non-income ETFs (QQQ for example) then what is the point of dividend ETFs?
I can just sell certain % of my portoflio (like 0.8% monthly) and I will end up with much more remaining capital.
Mathematically income ETFs don't make sense.
i agree with you! but math isn't everything. some people prefer to invest in a different way with less management and unknowns. that is the real benefit of these ETFs. its definitely NOT MAX returns. got a video coming up on this
Good ROC comes into it as well, doesn't it? I don't want to mistake 'dividends' for 'ROC', right?
That's exactly what I've been saying all along. Someone needs to know how much of the yield is ROC, so you know that must be reinvested.
Makes perfect sense. Bouncy Dividends make things interesting and vary monthly income.
YMAX started trading today🤔
Interesting. Thanks Adrian !
YMAX
Been waiting for a video like this thank you. This helps a lot.
One important question though- on the D’s and YM funds, you still have to pay taxes on the entire monthly distribution , even if you reinvest some. With this in mind - would reinvesting the amount over 12% and getting the compound effect, be better than less taxes on a JEPQ 12% type fund?
well in a non registered account, you pay taxes on the entire distribution like you said. its hard to answer any questions that has a "better" in it
Return on capital for some ym funds so far, so very little tax , but warnings to hold them stay true
Thankyou Adrian🙏
Q - Speaking of making your money work for you even in your sleep, wondering if you can say if one has 500000 cdn capital / cash to invest, one can expect to generate 5000 cdn / month after tax passive income? If yes, how / what needs to happen.
you would need to earn 12% annual yield (after tax). its very feasible. its in the 10-15% range .
😊Ola😊
Hi Adrian, I am a bit confused. Say I build an approximate portfolio similar to yours with $500k and it nets me roughly $5k a month. Why can I not take out that $5k each month to spend? Over time the $500k should go up in value on its' own. Maybe I misunderstood your video.
If I understand correctly some of the fund don’t always pay out the same dollar amount based on market conditions change. Perfect example from what I had was CI covered call TXF paid me 10% over a 3 month period and the next pay out it only paid me 7% because they most likely did not write as many calls and did not generate the same premiums as they did 3 months ago. Long story short is you need to reinvest a percentage of your income to always drive up your income. I’m hoping I understand correctly as that is my understanding.
Try running your scenario on portfolio visualizer with DFN (since it goes back to 2006). Start with $600,000, do not reinvest the dividends. Turn display income on. You would start with $70,000 in annual distributions but it levels off to $50,000 per year.
By 2024 your initial $600,000 is now only worth $229,434. Also, your monthly income has not kept pace with inflation. We can ignore the missed distributions for now. To have kept pace with inflation you would need $7400 per month today. This is why you can’t take the whole distribution. The purchasing power of your withdrawals is consistently diminishing and your overall investment is as well.
why don't invest something else if you are not looking for income? tax you every year via distribution.@@James_48
Forget split funds, which I see Adrian has been getting out of in recent past. Especially DFN which has gone from $20 to $5 since 2007 and missed a zillion payments, bad example. Say just the covered call ETF's such as HDIV, HDIF, HYLD, USCL, ENCL, HPYT@@James_48
sorry, not a zillion payments, but a few, and it got hit had from the 2008/09 financial crisis.
Can someone give me a 10 etf portfolio for 8-9% average yield and as low risk as possible ? thanks
have you seen my digital product :)?
you explained this very well I think you can pull more than 12 percent out per year with these funds but for sure you will need to invest at least half the income back into the funds
yes great advice if not 2/3rds!
1/3rd of QQQY's %50 dividend is still better than XYLD pays.
What about QQQX in this scenario?
similar to JEPQ
Good explanation. Too bad the JEPY has cut their distribution rate in half in 3 months and the NAV is down over 5%
JEPY is beating JEPI. "too bad" ? i dont think so.
can you make a video about ymax ??
I must be missing something here. If I withdrawal all of the dividends from a JEPQ to live off of, I can only withdrawal 12% of a QQQY and have to invest the rest? Its the same as? Why not just withdrawal all the dividend interest from the QQQY and place it in a savings account and live off of that? Every month take the div's and live? Some months may be higher than others, but isn't that called budgetting?
it goes back to understanding QQQY and how the distributions work. They will mostly likely be gradually lower over time. its all about account value management
@@PassiveIncomeInvesting I have qqqy and thinking of selling. Seems to not make any sense keeping it if it goes lower over time. I don't see how any management adds value.
I know you've build your brand around passive dividends, have you looked into writing your own covered call now that you're no longer a resident ? Do you have an idea on what kind of percentage you are leaving on the table between doing it yourself vs having an ETF doing it for you ?
i actually have not looked into it but its entirely feasible to do it yourself. i just do not want to put in the time or have the interest. id rather spend my time elsewhere. its like going to a restaurant. you can save money by cooking yourself but you have to buy the stuff, cook it, and clean up afterwards
Bought a bunch of $TSLY @9.95
That's a great price given its current yield but if tsly keeps cratering like it has been... Remember it was $20 not that long ago.
h9ow many times can you say "Right"?
i know, right?
@@PassiveIncomeInvesting heh
Could you live off of fepi without reinvesting?
hard to say but its definitely possible . still early to tell . OTM calls certainly helps
Nasdaq was up 1.35 % and FEPI was up .95% today.
They have paid out roc
You can supplement your portfolio with these funds, not hang your hat on them. I currently have only 8% of my portfolio in these type of funds, which is acceptable in my opinion. I DRIP them every month and sell shares when I need them. I couldn't be happier.
i hung my hat on them and its working out great for me
That is exactly the same thing that people said about margin investing in the 1920's.
Originally from Montreal here! I have a portfolio where i yield approx 195K a year in 10 high yield dividend etf’s such as these. I have jepq and svol and also tsly, aiyy, oark, etc. however, i don’t spend any of it and reinvest all. I use it as a cash flow mechanism to spread my money around to buy some growth and dollar cost average into tsly, or others when they are down. When i get ready to use this money in 6 years, i agree with you to only use 30% of it and reinvest the rest
I didn't hear anything in this video to tell me that I shouldn't invest in any of the yieldmax ETFs, just that it shouldn't be my sole source of income. Is that a correct understanding?
He said more than that. He stated that if the yield is more than approximately 12%, you will need to reinvest a corresponding percentage of the monthly income to maintain your capital with these high yield funds. He stated that such funds require more portfolio management which begs asking the question, why bother?
His main point is you need to reinvest some of the money to maintain the NAV.
His tune is changing. Now the NAV is important. The crazy yield ETFs have taught him that.
@@pauljose1261Hello thank you for the response. I often hear that on many blogs discussing the yield max ETFs that you should reinvest or drip the dividends to make up for the lowering of the stock price. But I don't understand how that is a solution. If you're constantly losing capital from the investment there has to be a point where the dividends don't make up for the lose.
Right now I'm down $2532 with TSLY. If distributions remain the same $.56 at the end of the year my 600 shares will yield $4032 which gives my a plus of only $1500. That's not great and that's only in the stock doesn't go lower.
Hoping that it will go up seems like a bad strategy right now.
Capture 30% and re invest the rest.
You're not explaining that dividend payouts directly subtracts from the stock price. So I'm not sure how you're making money off dividends since it's just paying my capital back.
yes its true, but its not just "your capital back" its part of your "investment back". HUGE difference. if a fund gives you 10% yield. After 10 years. you get your whole investment back right? so what what would you consider the dividend payment after that?
Any comments on YMAX?????
soon! patience lol
These covered calls options ETFs have decent yields but their NAVs will erode overtime. Not a good investment.
Then buy something like FEPI. Its structured for little to no NAV erosion over time.
@@charlesolinger9735So far it looks good. I will buy it if it keeps performing like it is.
The general idea is that you reinvest a portion of the yield, the ROC (return of capital), and the question is how much of the yield is ROC?
About 2/3 of the qqqy payout since inception has been eaten up by nav erosion.
@@1houracademy … assuming you are correct, then reinvesting 100% of the dividends would cause the holding to grow by 1/3 of the distributions each month.
Just missed the podium
?
Do you put together a sample portfolio of those 10 to 12% return etfs you mentioned a few other more you can add to the list. Thank you.
Shouldn’t read, can you put together and also all of them from the American market?
Nice video… you can track tsly because it already has a 1 year performance history and ask yourself how much rich are you willing to tolerate… have a great day
It depends greatly upon the date of purchase due to extreme volatility. For TSLY, Jan 4th,23 to now has a 46% return. However if you purchased on Nov 25,22 you'd have a -1.41% total return. Just a few days made a huge difference.
50 million in spy gets you like 750k a year in dividends lol
lol
i am at 600k divs now with much less . . but its too much tax so will change it
First!
Second
First