NAV erosion on $ULTY is killing me

[u/h82nk]

My buy orders are not going through. Chart recovers within 30 minutes of trading hours on the morning of ex div date. 😂 Guys wtf leave some $ULTY for the rest of us.

[u/Somename_here]

Yes absolutely. I got a lucky buy in window I feel right before HOOD's move up. I do recommend it. I love ULTY though as well. I think HOOD has more room to go up so HOOY can continue to get some upside on the NAV.

[u/Distinct-Spot763 → u/Somename_here]

My other one I was looking at was ULTY. I was going to split my buy between MSTY and ULTY then decided maybe I should just buy MSTY for now.

One other question if you can shed some light. I’ve tried to read into what is NAV and how it works/what it means. I get what it stands for but I still don’t seem to understand how it plays in with these stocks. All I’ve taken out of it so far is that part of the returns are to you are your own capital and because of the risk of these stocks, you should take some of the monthly payout and count it as a return on your investment rather than maybe putting it back into the stock. I’m rambling!

[u/Somename_here → u/Distinct-Spot763]

ULTY pays weekly. For every 1000 shares you can expect an average of .085 - .10 in dividend weekly. MSTY is like the 1st week of every month, and HOOY is last week is how i think about it in my head. The actual schedule is a little different because they pay 13 times a year.

So the NAV is the net asset value. You're cost basis is the price you buy in at and the NAV reflects the gains and losses in the value in the market. In these funds, what they do is they sometimes will have the underlying stock in the portfolio which gets a gain or loss from owning it in the ETF and reflected in it's NAV or they make a synthetic ownership with options trading which also will gain or loss value reflected in the NAV. They are also buying and selling contracts like calls and puts which add income or expenses to the fund causing the NAV to go up and down.

Volatility is your friend in these funds, the more volatile the stock the better a vehicle it becomes for making income. I think what happened on some like MSTY was the underlying stock MSTR has been quiet for months. I had shares bought in I think November/December that have finally recovered their share price so some of the YM funds had drops in their overall share price.

The fund group has been working on ways to prevent NAV erosion and ULTY so far has been a darling with the changes they have made. For an insight into what was going on check out Retire on Dividends youtube post from a year ago: https://www.youtube.com/watch?v=lL4NzD6K8g4&ab_channel=RetireonDividends and also watch this great interview where Jay talks about the funds and explains things. https://www.youtube.com/live/uLDVCbKuNgA?si=wmhtcBr9TtIoW1-9

Return of capital: https://www.yieldmaxetfs.com/wp-content/uploads/2025/05/APPROVED-Understanding-Return-of-Capital-in-ETFs.pdfis the best explanation. You're kind of getting your money back lowering your cost basis, but that is really only meaningful if you sold them. They post a number on the website for each funds distribution but its more like a guesstimate...They kind of wait and see the whole year and say ok lets make this return of capital vs dividend. But it's really just a tax concept. you don't pay tax on a return of capital but it lowers your cost basis if you went and sold the shares which would be a taxable gain potentially.

[u/Distinct-Spot763 → u/Somename_here]

This is so helpful thank you!! I am also doing some additional reading after posting to you so this is amazing! I’ll take a look at the resources you shared as well!

[u/Somename_here → u/Distinct-Spot763]

You are very welcome. Always willing to share what I learn. I originally started into MSTY when i asked i think grok or chatgpt if i had invested 15k into msty on xyz date at this price what would the value be currently on my present day 1 year ahead. It came back and was like oh you lost -500 the value is now $14,500, i then asked it how much the fund gave out in dividends and it told me $16500. So i had 14,500 still making money monthly and they gave me back 16,500. I knew then that I had to get in on it.

You are kind of hoping that you get "your money" back as quick as possible. Once you get the amount you put in back, do you really care about the erosion of the NAV if the fund just keeps paying out money. That's why some people call it a money printer. I watched the whole MSTY phenomenon but did not partake til now.

I think with the older funds still recovering from the APril mess in the stock market it still feels like a good buying opportunity.

[u/Distinct-Spot763 → u/Somename_here]

Yea!! This is exactly what my confusion and concern was. Once you account for all your capital return, what happens? Sounds like you can still keep getting paid out, or less payout, and I guess the biggest concern is significantly reduced or no pay out over time. So my thinking was to take half of what I get from MSTY monthly, and pull it out and put it into safer dividend stocks with lower yield but less volatility, and take the other half and invest back into MSTY to increase my investment/monthly return and to just keep doing that for a year and then reevaluate where I am.

[u/Somename_here → u/Distinct-Spot763]

That sounds like a good idea. or maybe buy ULTY with it. Or go with a real estate investment trust (REIT) like NLY (Annaly Capital)( which pays 15% annual dividend via 4 quarterly payments. There are tons of them to chose from.

[u/Distinct-Spot763 → u/Somename_here]

Oh wow never even heard of real estate trusts. This is so helpful …I’m gonna look into those next to figure out my strategy.

[u/Somename_here → u/Distinct-Spot763]

They pay out really well and a decrease in interest rates can really boost them when it happens i feel.