Our valued sponsor

Unique Payment
Sword and Shield

Opinion on yield max ETF

SilverNeo

SilverNeo

Pro Member
Oct 25, 2024
67
34
43
48
Paris
#1
What is your opinion of yield max ETFS as some of the returns look crazy like 150% plus per year etc...

They do this by trading options on the underlying asset.

https://www.yieldmaxetfs.com/our-etfs/

I'm looking at it because even if NAV (Net asset valse goes down by 50%) you are still up a 100% (150-50%) in income and then you can reinvest or just put the money in something else.

and for those that are already down like 50%, you are buying it on the cheap.

So then after a year, you have doubled your money, invest in something less risky and even if the fund goes under, you lose nothing.

And many of these have like 1-2 billion in assets I would be looking to invest like 70-80k to test it out.

I'm wrong or I'm missing something ever here as this just seems too good to be true?
 
  • Like
Reactions: ilke
#2
Unless you are a US person you need to take into account US dividend withholding tax depending on your tax residence that will be deducted from each distribution, hence mitigating the DRIP compounding effect and not being able to avoid long term NAV erosion.

IMO rather invest in income ETFs that offer less yield but stick closer to the underlying asset and grow without fully reinvesting (NEOS products for example).
 
  • Like
Reactions: SilverNeo
#3
Mercury said:
Unless you are a US person you need to take into account US dividend withholding tax depending on your tax residence that will be deducted from each distribution, hence mitigating the DRIP compounding effect and not being able to avoid long term NAV erosion.

IMO rather invest in income ETFs that offer less yield but stick closer to the underlying asset and grow without fully reinvesting (NEOS products for example).
Click to expand...
This is considered regular income and is not taxed as dividends but as income so if you are resident somewhere with no tax or low you will pay low to no tax.

The 30% withholding does not apply as it is option trading, not dividends

will take a look at NEOS tnx for the advice.
 
#4
SilverNeo said:
This is considered regular income and is not taxed as dividends but as income so if you are resident somewhere with no tax or low there is no tax.

The 30% withholding does not apply as it is option trading, not dividends
Click to expand...
Do you have first-hand experience? In theory you're right but I'm not sure stock brokers do not withhold US tax on YieldMax ETFs distributions if you are US nonresident alien.
 
#5
Mercury said:
Do you have first-hand experience? In theory you're right but I'm not sure stock brokers do not withhold US tax on YieldMax ETFs distributions if you are US nonresident alien.
Click to expand...
Yes this is what I was told by my broker so if they are wrong then I'm wrong have not tried it myself.

I had a look at NEOS

1742299018194.webp


Can you please give me your opinion on why you think they are better yes you are correct your NAV stays the same or goes a bit up but the payments are a lot lower so the total return is much less because it does not matter if your NAV goes down by 50% if you get back 150% in options so you are up 100% after that you put that into something safer and you are at 0% risk even if NAV goes to 0 you are on the same money you were

1742299255841.webp


My question is is there a catch as this seems too good to be true I mean with a 100k that's a 100k a year net if in a no or low tax country and a 100k is a decent salary assuming no dividend/options reinvestment.

And you can definitely reinvest from year 2 onwards after you have doubled your money with 0% risk (this is what I'm thinking about.)

Does anyone have any personal experience with this I'm mistaken or missing something?
 
  • Like
Reactions: forward
#6
I'm no expert but YieldMax funds do not invest directly in the underlying and use options strategies.

The main issue with synthetic replication is that the returns depend on the counterparty being able to honour its commitment. This carries a risk that physically replicated ETFs don't have.

They're also lacking history and actively managed. Difficult to figure out yet how they'll behave in long and different market trends.

The best way to confirm your view is to try and invest yourself for one year.
 
#7
Mercury said:
I'm no expert but YieldMax funds do not invest directly in the underlying and use options strategies.

The main issue with synthetic replication is that the returns depend on the counterparty being able to honour its commitment. This carries a risk that physically replicated ETFs don't have.

They're also lacking history and actively managed. Difficult to figure out yet how they'll behave in long and different market trends.

The best way to confirm your view is to try and invest yourself for one year.
Click to expand...
Agree I will probably try as I don't care for the long term if I can get 100% back in one year I will not be reinvesting those into yield max but into something safer bitcoin gold etc... and then from year two I will reinvest the gains for a year or two and then see but even if it goes to zero no loss.

Happy to be in a position where my exposure is for 12 months.
 
#8
Mercury said:
Do you have first-hand experience? In theory you're right but I'm not sure stock brokers do not withhold US tax on YieldMax ETFs distributions if you are US nonresident alien.
Click to expand...

WHT is applied at least to the YMAX ETF by the broker. YMAX is the fund of funds or fund of all the other yieldmax option ETF's btw.

SilverNeo said:
This is considered regular income and is not taxed as dividends but as income so if you are resident somewhere with no tax or low you will pay low to no tax.

The 30% withholding does not apply as it is option trading, not dividends
Click to expand...

Which broker follows this theory out of interest?

SilverNeo said:
I'm looking at it because even if NAV (Net asset valse goes down by 50%) you are still up a 100% (150-50%) in income and then you can reinvest or just put the money in something else.
Click to expand...

That's what most people plan to do when they invest in it. The question is whether the NAV and distributions hold up. I can only speak on YMAX which was launched in Jan 2024. It does not have much of a track record obviously but I have seen the NAV fluctuate and fund move from monthly to weekly dividend distributions some months ago. So far it looks good but NAV has recently really fallen off like everything else.

P.S I would personally not pick out individual yieldmax ETF's to invest in and instead look at the YMAX fund of funds to diversify among their offerings.
 
  • Like
Reactions: Mercury
#10
Martin Everson said:
WHT is applied at least to the YMAX ETF by the broker. YMAX is the fund of funds or fund of all the other yieldmax option ETF's btw.



Which broker follows this theory out of interest?



That's what most people plan to do when they invest in it. The question is whether the NAV and distributions hold up. I can only speak on YMAX which was launched in Jan 2024. It does not have much of a track record obviously but I have seen the NAV fluctuate and fund move from monthly to weekly dividend distributions some months ago. So far it looks good but NAV has recently really fallen off like everything else.

P.S I would personally not pick out individual yieldmax ETF's to invest in and instead look at the YMAX fund of funds to diversify among their offerings.
Click to expand...
I was told this by interactive brokers support that for the ones that are from options income such as CONY they don't do WHT

Ohh and i want to invest round 100k plant to split it along 5 ETFS to reduce the risk.
 
#11
JohnnyDoe said:
Like any financial product they can have a place in a properly built portfolio.
OP’s question indicates that he should not buy them.
Click to expand...
How do you figure Jonny doe? I'm investing small amount of my portfolio but i was looking around and investigating they seem crazy good as if they hold for a year your risk after that point is 0 as you just reinvest the base capital somewhere else.

After that you can reinvest anything you get back into the ETF with zero risk
 
#12
SilverNeo said:
I was told this by interactive brokers support that for the ones that are from options income such as CONY they don't do WHT

Ohh and i want to invest round 100k plant to split it along 5 ETFS to reduce the risk.
Click to expand...
You were right i talked to another support guy at IB and he says they do

Same goes online:
https://www.reddit.com/r/YieldMaxETFs/comments/1ikoaab/income_tax_on_msty_and_cony_dividends

So it appears to whom ever i spoke the first time was an not suited for the job.
 
  • Like
Reactions: Martin Everson
#15
JohnnyDoe said:
You should understand what you want to buy before you buy. Check their strategy, and see if it has a place in your portfolio. Absolute returns figures are meaningless.
Click to expand...
Agreed and this is my issue I spent a week reading on this and I would have bought it already the reason why I have not done so its not because I did not do my research or that there is a problem with the strategy etc...

I was wondering have I missed anything etc... as the returns seem to good to be true and when something looks too good to be true it usually is...

Most people are happy if they get 10+% ROI a year with some of these the ROI is 100% a year which is crazy.

So my thinking was no way I'm missing something.
 
#16
SilverNeo said:
as the returns seem to good to be true and when something looks too good to be true it usually is...
Click to expand...

Your instincts are working well to save your a*s :D.

SilverNeo said:
Ohh and i want to invest round 100k plant to split it along 5 ETFS to reduce the risk.
Click to expand...

If in doubt average in a total of $5k a month across all 5 i.e dollar cost average. And don't think of it as losing returns with this strategy but saving capital and heartache. Even on $60k invested over the course of one year if the returns hold up it should still be good compared to other investments.

In short don't put $100k in at one NAV price.
 
  • Like
Reactions: SilverNeo
#17
Martin Everson said:
Your instincts are working well to save your a*s :D.



If in doubt average in a total of $5k a month across all 5 i.e dollar cost average. And don't think of it as losing returns with this strategy but saving capital and heartache. Even on $60k invested over the course of one year if the returns hold up it should still be good compared to other investments.

In short don't put $100k in at one NAV price.
Click to expand...
Agreed good advice actually thank you.
 
#19
Yup there is no substitute for diversification. If your going for these high dividend ETF's spread the risk around and don't try and pick individual winners from the pack.
 
  • Like
Reactions: JohnnyDoe
#20
  • Like
Reactions: Mercury and Nicholas Van Orton
You must log in or register to reply here.

Forum Announcement

Latest Threads

Top Bottom
Back