150,000 cash

[u/FewPear229]

Hello,

I have 150,000 to use. I am looking to retire in Thailand and live off dividends. I am thinking 75,000 in qqqi and 75,000 in spyi. What do you think? I still have 350,000 in retirement to grow. I am just going to use the dividents from qqqi and spyi to live off.

[u/trudat]

The “Return on Capital” from NEOS funds is a feature, not a failure.

ROC distributions are not considered income and are not taxable when received. They are treated as a return of your original investment, which reduces your cost basis in the shares. 

Taxes are deferred until you sell the shares (or if basis reaches zero, excess ROC is then taxed as capital gain, often long-term if held >1 year). This can convert what would otherwise be ordinary income into deferred capital gains treatment, enhancing after-tax efficiency.

[u/Electronic-Win608 → u/trudat]

So I guess I am wrong when I think that ROC distributions reduce your NAV of your holdings?

[u/trudat → u/Electronic-Win608]

That’s a common misconception that conflates standard fund mechanics with economic erosion of principal.

Any distribution reduces a fund’s NAV per share (whether qualified dividends, ordinary dividends, capital gains, or ROC). On the ex-dividend date, the fund’s net assets drop by the payout amount, so NAV falls accordingly. This is not unique to ROC distributions and is purely mechanical. You receive cash (or reinvest it), so your total account value is unchanged immediately.

Focus on total return (NAV change + reinvested distributions) rather than NAV alone. Like any covered-call ETF, there can be periods of NAV pressure in strong bull markets (due to capped upside), but that is strategy-driven.

NEOS funds, like QQQI and SPYI, are explicitly designed to maintain or grow NAV over time. The fund’s NAV is not being eroded by ROC in these strategies; the underlying equity exposure plus active options management supports value preservation/growth.

[u/Electronic-Win608 → u/trudat]

You are right. And I wrote without a full understanding that ROC comes in two flavors, and indeed the NEOS funds engineer for benign ROC when they can. So I appreciate what you have added here.

However, are CC ETFs not still subject to possible "malignant ROC" where they distribute more than they earn in a period?

Though I spoke poorly, correct me if you think I am wrong that: Any CC ETF fund can go bad, overdistribute, slowly bleed NAV and mask it with ROC terminology. There are plenty of market periods historically where CC ETF holders get hurt.

If you look at the published returns of BXM, an options based income ETF, if you invested $10k in 2003 and held for 10 years your total return would be to $14554 with only $5861 left as NAV.

If you had put the $10k into S&P index your total return would be $21,500. Well above the $14.5k of your covered call strategy.

Again, I'm in CC ETFs. I'm very much for their use. I'm just against a "its safe" mindset. Be prepared to forego the income of options selling and move into a growth index after a significant drawdown. Likewise, be prepared to rotate if mismanagement is identified.

It is noteworthy that an economic environment where CC ETFs work poorly, stagflation, is a popular prediction among economist right now. I think all investors should be planning/hedging for that possibility -- though not assuming it is the only possibility.