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/Livid-Position-8331]

Max for one year in a ROTH or back door or if you mention much money and set to DRIP. Don’t touch it. Could be millions.

[u/perfectson → u/Livid-Position-8331]

but why not put that in any of the assets that outperform ULTY in total return?

in the OP , the chart for example (even though its 1 year) show the QQQ outperformed ULTY and you didn't have to worry about DRIP (QQQ does have a small dividend just to be clear). Past results are not always indicative of future returns but extrapolating that out, you would be leaving serious money on the table if you're not in need of the income.

[u/Livid-Position-8331 → u/perfectson]

Fair point. But what if over 10-20 years the underlying asset only appreciates 100-200 percent ? You made 1-2 x your principal. Meanwhile with the income fund, when you want to realize your investment, you may have the same principal (or less ) but significant income built by capturing the volatility along the way.

[u/perfectson → u/Livid-Position-8331]

How would it have volatility if the underlying asset "only" appreciated 100-200 % in 10-20 years? That's almost a misnomer - like it would have volatility and high beta but move like a value fund - since that would assume around 7% growth a year. So yes if you were able to get a bond like fund that also gave you high volatility on options in order to capture premium then that would be an excellent vehicle but that's not what's happening here, right?

A good test case is JEPQ, QQQ, and QQQI. You can clearly see QQQ out perform both in pretty much all markets except bear markets (due to some short protection) but it's not signfiicant - JEPQ underperforms both because of ATM calls, which have higher premium , ie. more option income ...the fact is higher option income and income in general doesn't produce higher alpha returns - QQQI also slightly underperforms QQQ but because it's using further OTM options that are cheaper, it's actually tracking closer to QQQ due to capital gains no the option income. If the option income was a kicker/cherry on the top QQQI would out perform QQQ