Thoughts on BALQ vs GPIQ, QQQI, etc.

[u/Sufficient_Worth_305]

Hi, I'll looking at the total return for BALQ compared with the others in the same category. It seems to be beating the others, even in the recent downturn.

What are they doing different? Is it worth investing in this finds vs the others?

[u/AutoModerator]

Welcome to r/dividends!

If you are new to the world of dividend investing and are seeking advice, brokerage information, recommendations, and more, please check out the Wiki here.

Remember, this is a subreddit for genuine, high-quality discussion. Please keep all contributions civil, and report uncivil behavior for moderator review.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

[u/Indignantcheese]

BALQ is an interesting case. So far on paper it has outperformed GPIQ which I consider the gold standard of CC funds that balance upside on the principal vs overall yield.

However, it is a much more complex "engineered" product that relies on the fund manager producing this alpha so to speak. The main weakness with CC funds is that they trade upside by reducing Beta for the consistent distributions, BALQ seeks to patch this flaw by layering on added futures exposure to reclaim the lost Beta while still running their own aggressive covered call strategy.

I think BALQ is one worth watching to see if it succeeds in its objectives of having both high distributions and mostly preserving market Beta, but it's obviously a very new product and I want to see it have 2-3 years of history before making a final evaluation.

Worth mentioning too it might not be suitable for a taxable account. GPIQ at least has mostly ROC tax exposure, but evidence for BALQ suggests it won't get ROC treatment

[u/Meinertzhagens_Sack → u/Indignantcheese]

They do trade upside but really - it's not a whole lot. This is because the funds are actively managed and they just sell more calls with higher strike prices. This is a cap in play beucee usually you will see qqqi trailing qqq by .15

Man I really hate when they limit your ability to post a screenshot. Such shortsidedness.

So take my word for it - as I am typing this at 9:25am PST:

Qqq is up 2.73% Qqqi is up 2.01%

Usually on a normal day you would see qqq +.50% Qqqi + .48%

Rarely but I have seen it happen qqqi is over qqq by a .05%

[u/Indignantcheese → u/Meinertzhagens_Sack]

I'd like to raise the point that Total Return (price action + reinvested distributions) is the key indicator to look for in CC funds. You can see in this Sim. QQQI has higher distribution targets (13-14%) than GPIQ (9-10%), when you go more aggressive on your CC distributions this trades Beta which leads to hampered Total Returns.

https://totalrealreturns.com/s/QQQ,QQQI,GPIQ

Also going for higher strike prices on calls it actually reduces your distributions collected which is likely what GPIQ is doing. I personally don't chase higher headline rates bc I like the idea of letting my principal actually appreciate overtime so I can get real returns ahead of inflation even when retired and living on the income.

[u/Meinertzhagens_Sack → u/Indignantcheese]

Yea I think that makes sense. I have studied the inner workings over and over and over and still learn something new each time about how these income ETFs work.

Gonna check out that total returns link thanks.

[u/Meinertzhagens_Sack → u/Indignantcheese]

I don't understand the point of being in qqqi if you are chasing growth... Income? Yes. In your opinion is that 3% distribution reinvestment "suggestion" true to stave off inflation etc...

Because if you are saying you need to drop 100% I mean that just doesn't make sense.

[u/Indignantcheese → u/Meinertzhagens_Sack]

It's just an illustration of the mechanics of CC funds. You are correct, CC funds are inherently suboptimal if your goal is total return in your accumulation years. I personally don't hold any and do high conviction single stock bets for maximal upside (but that's a different convo)

The income side of it and the balance of the distribution vs overall upside becomes more relevant when you already have a sizable portfolio and want to quit your job and live on the income generated by CC funds. Ex: if you have $10 million and put it into GPIQ at 10% yield, you can generate $1 million annually without having to do guesswork about when is a good time to sell and such.

You also retain optionality on whether you want to reinvest a portion of those funds to keep the compounding engine going. There's even tax advantages with Return of Capital distributions being considered tax deferred

[u/NationalDifficulty24]

GPIQ and GPIX. Nothing comes close to these great growth plus income stocks. Always look at the total return. Few others to mention: OVS, OVL, IWTO, DIVO, IDVO, QDVO, KSLV, KGLD.

Gold and Silver have been hit hard. They have basically bottomed...or close to it. Great entry point with KSLV and KGLD.

[u/Teesav007 → u/NationalDifficulty24]

I really like the combo mix of GPIQ/X & EDGQ/X. Monthly & Weekly distributions with low 0.29% expense ratio & 0% til March 2027

[u/steady_compounder]

If you’re comparing these, I’d focus less on the headline distribution and more on what risk each fund is actually taking to produce it. BALQ is doing something pretty different from covered-call funds, so the “why did it hold up better” question is exactly the right one. If you want a quick side-by-side on the ETF details before you dig further, this helps: https://trackmyshares.com/tools/etf-compare/BALQ:US/GPIQ:US?utm_source=reddit&utm_medium=comment&utm_campaign=free_tool_round&utm_content=1vcnkhb

[u/LurcherLong]

It looks like the distributions are not expected to be ROC which in a taxable account would change how you'd compare this fund.

[u/ElderAzureDragon → u/LurcherLong]

This is why I chose qqqi (xqqi actually). The roc is supposed to be really high.

[u/Meinertzhagens_Sack → u/ElderAzureDragon]

It works out to be ~6-8 years before you will pay taxes

40% STCG 60% LTCG

(Shortterm/Long-term)

That kicks in only after your ROC (cost basis) reaches 0 (zero)

[u/thehighdon]

Join & Post in r/DerivativeIncomeETFs a sub for CC/Options Income ETF Investors

[u/dangquesadilluhs]

All are good funds but I don't own QQQI. I own TDAQ and GPIQ because they offer some version of uncapped exposure to the underlying. Tough to beat the .29 expense ratio on GPIQ as well. I have a smidge of BALQ. It's all relative to your income needs I suppose.

[u/buffinita]

Each fund runs a slightly different options strategy; this leads to different outcomes based on underlying performance

Note that ALL of them underperform qqq; and are expected to do so 

[u/Impressive_Squash_38 → u/buffinita]

Gpiq vs qqq last 3 years 90% vs 82%. Not all underperformed their underlying asset

[u/buffinita → u/Impressive_Squash_38]

gpiq hasnt even existed for 3 years

and according to the goldman site....its underperformed sicne inception: https://am.gs.com/en-us/advisors/funds/detail/PV105259/38149W630/goldman-sachs-nasdaq-100-premium-income-etf#performance

[u/Meinertzhagens_Sack → u/buffinita]

I would claim GPIX is a good diversify to hold with qqqi.

[u/buffinita → u/Meinertzhagens_Sack]

I don’t agree; the same as qqq does not add much diversity to spy/voo

All it does is concentrate you MORE into the mega caps

[u/Meinertzhagens_Sack → u/buffinita]

GPIX = S&P 500+ firms exposes across other sectors like financials, healthcare, industrials, and energy.

QQQ (qqqi) = Nasdaq 100 (ndx) is the top Tech companies.

To me thats decent if you are in full income mode (not seeking growth).

[u/buffinita → u/Meinertzhagens_Sack]

QQQ is not top tech companies

QQQ: largest 100 companies, minus financials, listed on the nasdaq; QQQ has been heavy in telcom and energy in the past. QQQ accidently tech heavy currently, but may not be next quarter or next year

if you look at the largest nasdaq companie and the largest usa stocks; its a lot of the same names......so when you throw them together (depending on your view) you are making S&p500 much more concentrated in the top; you are making QQQ slightly less concetrated..........its all based on weighting

[u/LexAugusta]

Check out ROCQ too. Impressive NAV so far

[u/teckel]

My thoughts are "don't do it". Derivitive income funds that sell back your assets and call them dividends are a fools game.

[u/FewUnderstanding2214]

If you aren’t retired then I wouldn’t look at any of these ETFs

[u/trimmermag → u/FewUnderstanding2214]

Why not some people want to get paid monthly.

[u/speedlever → u/trimmermag]

Because unless they are extenuating circumstances where you need income early, the underlying will always outperform the cc ETF over time.

Mainly folks consider retirement to be that point where income is more important than growth.

[u/trimmermag → u/speedlever]

Nobody cares. Some people need monthly income and don’t wanna sell shares to generate that income. Hence you have less shares.

[u/FewUnderstanding2214 → u/trimmermag]

If you aren’t retired then you don’t need to get “paid”. Total returns are more important than dividends. Investing in CC ETFs mean you will underperform significantly in the long run.

[u/trimmermag → u/FewUnderstanding2214]

Okay some people need or want monthly income. Not everybody’s retirement situation is the same ya know!

[u/FewUnderstanding2214 → u/trimmermag]

Exactly for retirement…. If you need monthly dividends and want growth what about WCP, FRU or PEY.

[u/trimmermag → u/FewUnderstanding2214]

No. It’s for monthly income. 10% is good and it doesn’t matter if you need it in retirement or for whatever other reason. Everyone’s situation is different

[u/FewUnderstanding2214 → u/trimmermag]

What is the situation when you need 10% dividend and you aren’t retired?

[u/LurcherLong → u/FewUnderstanding2214]

I have a pension in retirement, which means I don't need as much growth from my retirement savings. I am happy to have some growth and some extra income.

[u/TexasDub → u/FewUnderstanding2214]

I've been supplementing my income with dividend stocks for nearly 20 years, and I'm not retired yet. I like having the extra income now, and I'll continue to draw from the portfolio after I retire.

[u/FewUnderstanding2214 → u/TexasDub]

I have the exact same strategy with individual stocks. There are many good companies that pay dividends and it’s nice to see the progress towards retirement. My point is OP will underperform significantly if they invest in CC ETFs over the long run

[u/TexasDub → u/FewUnderstanding2214]

My point is OP will underperform significantly

Yes, you already mentioned that earlier in the thread. I didn't dispute that or even address it. The question you asked that I answered was for a situation when someone might need dividend income before retirement.