Retirees -- Opinions? Experiences? Is 14% Div Too Good To Be True?

[GreatGazoo]

Not looking to give or received financial advice -- just to share experiences.

I am approaching retirement and looking for investments which provide monthly income without selling or reducing the principal. I have done well with QYLD, an older ETF (started in 2015) which rents stocks to options traders via covered calls. It paid 12% and appreciated by 6% over the last year.

A new fund started in 2024 which uses the same strategy but also uses Section 1256 contracts which reduce tax liability by using ROC (return of capital). The fund is QQQI. Yield is 13.8% and NAV grew by 4.5%.

https://neosfunds.com/qqqi/

I generally understand and accept that 7 to 8% annual is considered an average and safe rate of returns so I am concerned when I see a fund offering nearly twice that. But I also believe that covered calls are one of the safest plays in the market -- they are just too complex and cumbersome for an individual trader to execute well and that for me is the appeal of these ETFs.

What other choices should I be looking at?
Any experiences with these kinds of funds?
What has worked or not worked for you?

[surfered]

1. No experience with these, but I agree it sounds too good.

[bucolic_frolic]

2. It's an ETF.

Check the long term chart. Like most large cap funds, a large portion of its holdings are the biggest tech names. Check its strategy. Covered calls are a hedge on risk.

[GreatGazoo]

3. They have the same covered call set up with a S&P index ETF

SPYI. It lagged the red hot SPY by 15% during the last 2 years combined but still averaged 18% per year.

https://neosfunds.com/spyi-comparison/

As I understand it covered calls hedge risk but the downside is they limit gains, eg the QQQ was up 24% last year and QYLD only netted ~18%. I have only held QYLD during the last two years, a bull market. I should probably look at how they were in 2021.

[bucolic_frolic]

4. Check the 10 year and one year chart

Why did it dip last August? I don't know.

https://finviz.com/quote.ashx?t=QYLD&ty=c&ta=1&p=d

[GreatGazoo]

6. The Fed paused rate cuts and missed an expected cut

so the whole market corrected.

https://www.cnn.com/2024/08/01/economy/fed-rate-cut-when/index.html

[bucolic_frolic]

7. That was quite a buying opportunity. /nt

[marybourg]

5. You get paid for taking risks. Short term treasuries

are paying about 4.5%. Judge the excess risk from that.

[Mike 03]

8. That's around the range I'm getting on bonds

4%-6%. I've been quite happy to have that.

But the OP has me intrigued.

[marybourg]

9. If you're willing to take the on the risk of complex securities you may not

fully understand . . . .

[GreatGazoo]

10. You make a good point and the rule in investing is the same as the rule

in gambling: Never place a bet that you don't understand.

But covered calls are not as complicated as they may appear. The part I am loose on is the "return of capital" tax advantage and that I suppose is a question for me to take up with a tax consultant.

Covered calls are a way to own stocks (or in this case an index fund; collection of major stocks) and rent them out for income.

https://www.investopedia.com/articles/optioninvestor/08/covered-call.asp#toc-how-a-covered-call-works

QYLD held up like a champ today during the DeepSeek panic, moving less than half as much as the underlying index.