The Nasdaq 100 Covered Call ETF, QYLD, is LOSING your money. In this video, I’ll show you why the QYLD ETF is falling and why that 12% dividend yield is too good to be true. Find these stocks and get three free shares worth up $3,000 on Webull 💰 https://mystockmarketbasics.com/webull
I’ll also reveal five monthly dividend stocks that beat the QYLD for a higher return and great dividend. Now it’s not that the QYLD is a bad fund but it is losing your money compared to the monthly dividend stocks I’m going to show you. In fact, the QYLD returned just 8% a year over the last five years…yes even with that 12% dividend, it only returned 8% because the share price dropped so much and it’s hugely underperformed the stocks it holds . In this video, I’ll reveal five dividend stocks with an average return of 15.5% a year, almost double the QYLD, all with strong dividend yields and paying them out every single month. I’ll also explain why the QYLD strategy isn’t working, the hidden risks in the fund and the ONLY type of investor that should be investing in it!
There are a few things that are important when looking at the QYLD ETF to help you understand the strategy and where the risks are, and why the fund might underperform others.
First, the fund is selling calls against about 3% of its stocks each month, just enough to produce the cash needed to pay out that 12% annualized dividend yield. The cost of selling those calls every month is going to be a drag on the performance, though it’s fairly small. Also though, just using that covered call strategy, means if the stocks in the Nasdaq jump higher in one month…the fund is going to miss out on some of that because it’s sold another investor the right to buy those shares for cheaper. That’s why you saw the QYLD underperform the Nasdaq tech stocks by so much over the last five years.
Another weakness though is that because the QYLD is a fund of over 100 stocks, it loses the opportunity to run higher if any of those stocks does really well. The non-tech stocks like Constellation Energy and Ross Discount Stores tends to slow the growth and the returns versus the stocks we’ll look at.
You’re asking yourself, but if the plan is to hold the QYLD forever and just keep collecting that dividend…what does it matter if the share price falls? I’m not selling so I’ll never care.”
Nation, you know I love the buy-and-hold strategy but you’ve also got to ask yourself…how many stocks do you own right now that you’ve held for more than maybe a year or two? In fact, data from the New York Stock Exchange shows the average holding period for a stock is now just 5.5 months.
Even if you truly intend to hold the QYLD forever and resist the urge to sell, a lot of life happens in thirty or forty years. Expenses come up and even that 12% annual dividend isn’t going to be enough for most people to live on in retirement. Even on a $100,000 portfolio, that 12% dividend yield is only a thousand dollars a month. You’re going to need to sell the shares and when you do, it’s going to suck if you have to sell them for less than you paid.
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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