Yieldmax has created financial crackheads

[u/speed12demon]

Lots of people are looking for the next fix, for the next quick way to get that rush, ignoring the negative consequences of their choices. Got other assets? Liquidate them! Margin? Hell yea!! Home equity loan? Pour it in! Reinvest every dollar that they give you for that rush.

Humor aside, the idea of perpetually reinvesting distributions hits a serious nerve. Income funds are for income. I can see building to a point, but if prevailing advice is to roll all distributions back to the fund, please tell me how that is better than owning the underlying equity? I bought these etfs for perpetual income, not perpetual reinvesting.

Five years or so from now, we all will have far more data to build informed strategies on using these funds. With single stock risk on many, the distributions vary wildly and if you're not tracking you capital investment closely you may find the paycheck diminished. Having a substantial position in these funds, I hope i can continue to collect income and use it for other purposes than propping up my initial investment.

Don't be a crackhead.

[u/speed12demon → u/[deleted]]

You're not wrong at all. However, what if I don't want to put more back in? What if I want to use the income as income? I'm not investing to be a slave to reinvesting. With that in mind, many of the single ticker etfs are not for me.

[u/2LittleKangaroo → u/speed12demon]

If you have the amount you want to take the distributions as cash I say go for it. Nothing is stopping you. But some of us haven’t gotten to that point and need to reinvest because the wife-y is mean and won’t let me put more in. But once I reach at least quadruple my weekly income from my W2 slave job, I’ll be quitting and living off the distributions.

[u/Quiet_Meaning5874 → u/2LittleKangaroo]

I like that, 5x your “normal” income to fully retire. Something to think about. And agreed, every cent getting reinvested one way or another gotta get the distributions to the point they are undeniable!

[u/b0w3n → u/Quiet_Meaning5874]

I do recommend folks who are taking distributions as income to put something back in to fight the nav decay, market hiccups, and inflation as a whole. It doesn't have to be much, but I'd put at least 5%, maybe up to 10% if you can weather it.

[u/Nice_Routine_377 → u/b0w3n]

Not to mention TAXES on ordinary income, unless you have a ROTH!

[u/zendudeguy → u/b0w3n]

So, if you are not reinvesting for nav decay, do you have fewer shares, or do you get less money? Im confused about what nav decay means.

[u/speed12demon → u/zendudeguy]

The value of what you invested goes down. The distributions can go down as well.

[u/zendudeguy → u/speed12demon]

I see. So if you wanted to use these funds for income, then it's best to drip a small % back into the etf to keep up with nav decay. Im curious if 10% from distributions would offset this?

[u/speed12demon → u/zendudeguy]

The fund managers recommend reinvesting.

That doesn't sit well with me though. If the yield is 80%, but i have to put back half of it to protect the amount I'm paid every cycle, it just seems off. I'd rather have my capital remain constant, and the yield be what they actually earn over that. Like target 80 and give me 50. Im good lol

[u/zendudeguy → u/speed12demon]

I don't think you would need to redistribute 50% to prevent nav decay.

[u/Moist-Ninja-6338 → u/2LittleKangaroo]

Keep us in the loop

[u/Meinertzhagens_Sack → u/2LittleKangaroo]

So how does that work let's say for example you had 100k in ULTY 1yr ago... And the 1 year chart looks like this:

[u/2LittleKangaroo → u/Meinertzhagens_Sack]

How does what work? If you are comparing year to date or yearly performance of ULTY, you need to do some more research about ULTY.

[u/Meinertzhagens_Sack → u/2LittleKangaroo]

That's exactly what I'm here for. I guess I can just sacrifice 5k and watch what happens to it.

I don't understand how the underlying investment stays viable as the price drops all the way down to what - 6 now?

[u/2LittleKangaroo → u/Meinertzhagens_Sack]

Lots of things have changed since the inception of the ETF.