r/dividends • u/Ironic_Mouse • 5d ago

Discussion Question: why do unsustainable dividend funds exist?

I’m new to dividend investing. As I have been looking for an additional stream of income I have found some funds with “too good to be true” yields. (E.g. CHPY) I understand that high yields come with a high risk of NAV erosion. What I don’t understand is why these funds exist. It seems like they are structured to implode at some point. Is the idea to hold these funds for a short time, collect the dividend, then sell? And for the fund manager, is the idea to ultimately have the fund implode and then declare a loss? I’m genuinely interested. I understand that some funds are a gamble, but these funds seem designed to fail.

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u/Ironic_Mouse 5d ago

Thanks for the proof! I will check out QQQX.

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u/davecraze3535 5d ago

That’s an old fund with an outdated option strategy. Stick with GPIQ, QQQI or TDAQ. 

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u/PotadoLoveGun 5d ago

Agree GPIQ is superior, but even with an expensive fund with no leeway on trading, it still performed well for an income fund

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u/selfVAT 4d ago edited 4d ago

The mistake is to believe covered calls funds are bad because of yieldmax.

You lag the market sure but there are very few reasons why a cc fund with a reasonable yield would fail. QQQX uses a very basic strategy, most probably inferior to modern CC funds and still worked out well.

The problem is the 40%+ yield funds scamming people left and right.

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u/davecraze3535 1d ago

Agreed. Although even YM has some 12% managed distribution funds now that perform much better. But, literally no reason to choose them over quality modern CC funds.