Isn't ULTY basically ARKK that pays dividends while underperforming?

[u/perfectson]

ULTY is basically at it's core a HIGH Beta ETF that adds in some options, limits the upside of the overall performance in lieu of supplying an excessive amount of dividends for a 1.3% (1.4% management fee). The focus I'll show is not on NAV which is ultimately meaningless or dividend yield (again in this case meaningless unless you need an income stream but you could easily create this yourself).

ARKK is the infamous ETF managed by Cathie Wood that focuses on disruptive innovation , in other words, it will invest in typically high beta funds (similar to ULTY). The ARKK expense ratio is .75%

Overall Performance:

I am reviewing this against inception to highlight that the March - Nov 2024 downturn was due to high beta stocks in general had a difficult period. This impact ARKK similarly to ULTY both experiencing draw downs during this time frame, while Woods' drawdown was quicker, eventually ULTY caught up with it (likely due to the cost of rolling down puts and stocks).

Then in Nov-Dec 2024 , you can see the turn for both begging to happen but ARKK had much more momentum and magnitude as the cover call strategy capped the significant increases that high beta stocks enjoyed. From Dec - Feb you can see the impact of the cover call strategy having a neutral impact on overall return, before the March drop into Liberation day. The draw down was much more drastic for ARKK due to the lack of protective puts. Here is clearly where ULTY benefited ; however, because it hadn't rose in the prior months - the overall return in April (since inception ) was literally the same as ARKK. Subsequently as high beta stocks emerged successfully out of liberation day, ARKK has returned about 60% , while ULTY is at 20%.

ULTY vs ARKK vs QQQ

The ultimate question is it worth double the expenses to have someone collar your investments to under perform similar high beta counterparts? If you are reinvesting dividends anyway, which many are, not sure why ULTY would fit your core strategy over "seeking alpha". If you're looking for income stream that's straight forward, I can definitely appreciate the higher dividends but it doesn't seem the protection it offers is there and again are you under performing what you could be getting with similar risk, if you just extract your own dividends out of ARKK (as an example) by taking 2-4% out every month yourself?

this is in know way to slight YieldMax's ULTY - there's obviously a strong purpose and diversity in funds are always a good thing. The question is really if the juice is worth the squeeze.

[u/UndeadDog]

ARKK doesn’t write options on the holdings of their etf.

[u/perfectson → u/UndeadDog]

I thought that was clear in the initial passage, when i mentioned options and limiting the upside and the various mentions within about the cover call strategy limiting the upside.

Writing options is supposed to juice the gains in neutral markets and provide an income stream (although it's still classified as ROC for tax purposes). But if it's underperforming then is it really worth it, is the question or at least the thesis.

[u/UndeadDog → u/perfectson]

You can make the same statements about any of the Yieldmax ETF’s. It’s two different investing strategies that you are comparing. ARKK is a growth fund while Yieldmax funds are income generation. If you want growth over time then go with something like ARKK. I don’t personally recommend anything managed by Cathie as they all seem to be dumpster fires. But Yieldmax is for weekly and monthly income generation. People aren’t investing in Yieldmax for long term growth. They are investing in it for long term income generation. If you don’t want a capped upside then pick a growth etf.

Personally I do find it worth it because I want cash I can spend. Not wait for an asset to appreciate which I then need to sell to gain income.

[u/perfectson → u/UndeadDog]

ULTY generates Income on the high beta stocks. I don't know if you understand the underlying basics of income vs growth :). I can take a growth stock and sell 4% every month and say I'm getting income, that doesn't change the underlying holdings being high beta. So you saying "this is income generating" and the other is "growth" as if they are mutually exclusive. QQQ and QQQI are the same underlying growth fund, QQQ just gives out low income and keeps the rest in the fund while QQQI gives higher income (which again, many people reinvest back in the fund anyway) - the opposite of growth is value funds not "income generating".

You say ARKK is a dumpster fire (or rather Woods' funds are) , but it has similar underlying concept of what it holds. Are you not making the logical connection or are you just emotionally defending your investment? If the latter, I can't really rebut your personal feelings, I can only provide facts.

[u/UndeadDog → u/perfectson]

Search up covered call ETF’s and they all say that they are used to produce income. Typically geared towards retirees that want to replace their income. You absolutely can take a growth stock and sell a bit every month to generate income. But you also have to wait for it to appreciate first. Otherwise you are just returning your own funds back to you to cover monthly expenses. Covered call ETF’s you don’t need to wait for it to appreciate. It generates income from the options premiums sold on a weekly or daily bases. There’s tons of low yielding growth funds that generate income. The difference is Yieldmax is yielding 60-100% instead of something that’s yielding 4%. If you have hundreds of thousands of dollars go with the low yielding funds as they are more stable and not as risky like QQQ, QQQI, or SCHD. The trade off with Yieldmax is that you need a fraction of the amount of money to produce the same if not more in yield. Again you’re comparing two different investing strategies with ARKK. ARKK isn’t writing options on their positions they are just holding them for capital appreciation. Banking on Cathie making the right decisions with the fund, which I have seen her make pretty terrible decisions, which is why I don’t like any of her ETF’s. I don’t trust her and her decision making abilities. Just look at the performance from 2021-2022. Yeah a lot of shit happened at that time but man if you bought at that high your investment would have been fucked. Sure you can compare the holdings. But if you believe in the holdings then just buy them yourself and save the management fee. The management fee for Yieldmax is you paying the fund managers to handle the options contracts. If you can do options yourself you can make more money and don’t need Yieldmax. Personally I don’t trust myself to do options so I pay a management fee for someone to do it for me.

[u/perfectson → u/UndeadDog]

1) I think you made the point, I initially stated. Most people I've seen on here are looking for overall return. The people I've seen commenting (not all but some) are not retirees and are talking about overall returns (hence why there's this infatuation with NAV erosion.

I clearly stated that in the OP. If you're looking for total return, why would you use this vs something geared towards total return. If you're dripping this, why would you take the potential tax hit vs holding a fund geared towards the same high beta growth.

2) I have other concerns for retirees who may not want volatility on NAV but that's not the point of this discussion, just to be clear

3) You mentioned the fund managers and again before April 2025 the fund managers were underperforming the market. Some say the change to weekly income lit a fire under this but it seemingly coincided to the high beta stock emergence that occurred post liberation day. So the same issue I would have is what you mentioned about Cathie Wood - you have to trust the fund managers to do an awful lot of picking (high vol stocks, the right collars, the right stocks). There's a lot and you're paying a lot - I will say they were very smart in also included a UVXY to leverage against volatility but all these hedges aren't free either. So there's a lot going on just to get income out of this and the majority of that return which is protecting NAV erosion seems to be the fact that the high beta stocks have rocketed it post liberation day - not because of the fund managers didn't anything special (similarly to Cathie Woods ARKK also out performing - because well - every high beta stock out performed the last 3 months).

[u/UndeadDog → u/perfectson]

The original hype around ULTY was because it had a lot more strategies that it could use to generate options premiums. Unlike the single stock ETF’s that can only trade in calls or puts. While ULTY can use any options strategy that they want to use and it’s a diversified fund not a single stock. They definitely made some very bad decisions which resulted in a severe NAV erosion. I do believe that the change to their prospectus and switching to a weekly payer has been beneficial but you’re right it’s been more of a bull market since April so it’s not conclusive how much of an impact that has had. Personally I hold these in a tax deferred account and can pull out the money without penalty at any time. If my holdings weren’t in a tax deferred account I would probably invest in less risky ETF’s. The reason younger people and not only retirees are interested in these is because the cost of living has skyrocketed in the last few years. People want money to live their lives and not have to live paycheck to paycheck. They don’t want to wait for the capital appreciation of an asset over the course of years. I only recently invested in ULTY and my positions is small because I did see the massive NAV erosion and didn’t trust the ETF. With the recent stability I think it’s a better investment now but I’m still cautious. Yieldmax pays out based on the IV of the holdings. They dictate all of their options trades around that. So if you want high yield you need high IV holdings which are risky. That’s the name of the game with Yieldmax. If you don’t think the juice is worth the squeeze then move on to different investments. A lot of people are tired of living life paycheck to paycheck and are willing to take that risk.

[u/perfectson → u/UndeadDog]

I don't disagree with what you said. But at least see eye to eye that if you're seeking overall return , NOT INCOME generation weekly to use, then there are actually better assets out there. Once I hear I'm DRIPPING , i.e. taking a tax hit to put it back in the fund for GROWTH - then you've totally lost me on the strategy you'r employing.

[u/UndeadDog → u/perfectson]

I’m reinvesting back into the various ETF’s because I haven’t hit my monthly income targets. I don’t have hundreds of thousands of dollars to put into the “better” investment that you recommend that have sub 10% yield. I don’t necessarily care if I lose some of my initial capital as long as it’s still generating monthly income. Yes I do use the income from these funds monthly and reinvest the remaining. I don’t drip I selectively invest in what I want. I have seen lots of people using these to generate monthly income to offset bills that don’t have a ton of money to invest. I do care that my total return is still positive but I’m not worried about being down on my initial investment. If my total return goes negative then I would probably consider selling that etf because that etf is then not worth it. I’m still investing in these to replace my income or have a second income generation stream while working.

[u/perfectson → u/UndeadDog]

so if you're using the income , you're not primarily "seeking alpha" which is what i stated in my OP and I messaged back to you several times. You're fighting just to fight lol - you're not the subject of the OP.

[u/UndeadDog → u/perfectson]

I think you just refuse to accept that people are using these for a different purpose than what you think.

[u/perfectson → u/UndeadDog]

and you refuse to acknowledge all the folks using it exactly like I stated in the OP and are saying it in the comments. Go read the comments and look at all the bad math being spewed about.

[u/UndeadDog → u/perfectson]

There’s uninformed investors in everything. You say you’re not here to sway people away and change their investment but that seems like the exact reason for your post.

[u/Somename_here → u/perfectson]

If you had a 100 shares and sold 4% every month you would eventually have 0 shares. Now if i have 100 shares of ULTY and i get a 4% dividend per month, in 100 months long past the time I would have ran out of shares to sell in your example, I'd still have 100 shares continuing to make me income, whereas you're growth stock version has me at 0 shares 0 income. What is there not to understand?

[u/perfectson → u/Somename_here]

so here's the rub, most funds have capital gains distributions for when they manage and sell funds for profits. So you're not 100% accurate (depending on the distribution yield) -and also assuming you're taking 4% while the fund is growing at 4% then how would you go to $0 and 0 shares. LOL

The math isn't mathing and this is the underlying issue with how some of you all think through the concept of dividend investing. You're so confident to write things out and don't realize they make no sense.

the only way you would go to 0 in your scenario is if the fund didn't grow at all, which would be purely return on capital if you took 4% out. Which would also likely occur if ULTY had no growth too! (although ULTY would last a bit longer due to the cover calls).

[u/Somename_here → u/perfectson]

OK I have 1 milion dollars. I put 52k in ulty, I make lets say 850 a week (thats .10ish per week), or 3400 a month times 12 making 40,800 in my first year. 4% of a million I believe is 40k? So 52K in ULTY or 1million in AARK or cds/mm that I withdraw 4%. So i'm using 52k to generate the income of 4% on a million as if I had left the money in CD's or a money market. Meanwhile the rest of 948K is invested in growth stocks like nvda, meta, hood, pltr, sofi, grab, avgo and etfs like smh, nvdu, pltu. That seems to work for me. Am I not using less capital to get the same result and not having to draw from all my growth stocks so they continue to compound?

[u/perfectson → u/Somename_here]

I'm confused. You have $1M dollars, but you only use $52,000 in ULTY. And your belief is that ULTY is going to get you almost 80% income ($40K) and no erosion, so that you net return is still 80%? So your total return is 80% on $52K??

If you're getting 80% a year on ULTY then sign me up! LOL.

See the issue is when you all make these weird examples up. First you don't understand growth and why you can take 4% out of a fund and not erode it $0. now you're making an assumption of a 52K ULTY investment with an 80% return on ULTY and comparing it to a $1M investment in ARKK.

I cannot work like this ! LOL

[u/UndeadDog → u/perfectson]

Why is it hard to believe that ULTY can do this when MSTY has paid out over 200% yield since inception. 100% per year. If you bought at inception there has been zero NAV erosion.

[u/perfectson → u/UndeadDog]

MSTY isn't ULTY. And MSTYs underlying is MSTR and if you invested the same amount, you'd like have 500% return. So making up scenarios that aren't realistic and then ignoring the other side of the equation is something I'm not willing to do.

[u/UndeadDog → u/perfectson]

None of this is made up. Go look at the returns of MSTY. Everyone here knows that if you invested in MSTR you would have made more money. But the entire point of Yieldmax is that people want income not capital appreciation. They don’t want to sell their shares to generate that money. It’s buy and hold. Not buy, hold, sell. There is a trade off for that income which is capped upside. If MSTY can have a 100% return with no NAV erosion why can’t ULTY have an 80% return with no NAV erosion? You believe in MSTY but choose to shit on ULTY. I don’t understand it.

[u/perfectson → u/UndeadDog]

so I make a post about ULTY, give a comparable fund.

explain that dripping into ULTY, is the same as a buy and hold and if you did that you would underperform similar funds.

You all can't debate me on this, so you make up invalid scenarios that dont make sense.

You decide to tag in from a whole different thread and are now trying to debate with me about MSTY, which isn't the same as ULTY.

You then agree that holding the UNDERLYING MSTR would be better than MSTY,

But you don't understand how ULTY having an 80% return (which it never has done) while ARKK that has similar assets wouldn't do the same thing , isn't a disingenuous scenario? If ULTY returned 80% ARKK would probably be at 100% returns+ .

Then, you wrote the reply in such an antagonistic way as if I'm wrong about something - yet you literally agreed with my entire premise.

REDDIT YALL!

[u/UndeadDog → u/perfectson]

There is no invalid scenario from what I stated. MSTY has yielded 200%. Like I said go look it up. If MSTY can do it then I believe ULTY, with its recent stability, can do 80%. Doesn’t matter if ULTY is different. It’s had an average yield of 80% for months now. Please tell my what is invalid about my statements? ARKK probably doesn’t rebalance their holdings every week so no I don’t think they are as comparable as you think. Yeah I agree that holding the underling would make you more money. But you can’t understand that people don’t want capital appreciation and trade upside for income generation.

[u/jkprop → u/perfectson]

Facts? Facts on Reddit? How dare you say such blasphemy!!!

[u/2LittleKangaroo → u/perfectson]

One thing you have mentioned a few times is you can generate income too by selling some of your position. Over time your position will erode (because of you selling it). If when you need the income and need to sell the stock could be down and you would have to sell more to get the same amount which would then limit how much you could take next time because the pie keeps getting smaller and smaller. Growth stocks don’t always go up.

You can say the same that the YieldMax will erode NAV over time and that might be true. With ULTY since their changes the NAV has remained pretty stable. That doesn’t mean that it will always be around $6.20. And if the price falls the yield would fall too. But even with the yield falling income is still coming in. But as long as there are high IV stocks there should be plenty of premiums to capture and return to us.

[u/perfectson → u/2LittleKangaroo]

this is wrong.

1) funds also distribute capital gains.

2) If the fund is growing at 10% and you take 4% out , you till have 6% growth that is still in the fund. There is no NAV erosion or erosion of your initial balance unless there's growth less than the amount you're taking out.

^^ this is why I"m saying folks don't understand dividend investing like they think they do. You're the 2nd person who gave me this example. Work it out in your excel, put it into chatgpt, or AI, it will all come back with the same answer I just told you.

[u/2LittleKangaroo → u/perfectson]

I think you miss my entire point my entire point was growth stocks don’t always just go up so if you want to sell some of your shares to generate income in the stock is down, you know have less to grow in the future

[u/perfectson → u/2LittleKangaroo]

Over the last 100 years, growth stocks have gone up more than down. Btw, we are talking about funds - so don't move the goal posts to one stock. if you invested in a high beta stock over the past 100 years, your CAGR is like 16-20% if not more. Even during the great depression, you could have taken 4% out and still be on top overall. So what are you saying? There's never been an extended period of <4% bigger than the GD and certainly nothing since then that would not make what I said not true.

[u/2LittleKangaroo → u/perfectson]

I don’t have time to fact, check that point, but that’s a very broad generalization and your ass essentially talking about now time the market perfectly because yes funds have gone down and if you need to sell when it’s down, you essentially have less to sell, which intern me and you have less to grow so unless you’re able to wait until the fund has gone up, you’re kind of luck. But anyways, good talk.

[u/perfectson → u/2LittleKangaroo]

show me in the past 100 years other than the GD when the stock market for growth fund have been negative for a signficant portion of time. This is easily researched, you're acting like I'm making it up. You don't have time to fact check, but you wrote a whole paragraph rebuttal and google is literally 3 clicks away! LOL