Why I’m Dumping QQQI & JEPQ For This High-Income ETF!

[00:00:01]Hey everybody, welcome back to the channel. I'm Doug the Retirement Guy and I had a Patreon member say to me, I'm dumping QQQI and JPQ for a high income ETF fund. And I'm like, what are you doing? I was kind of thrown away by what he said.

[00:00:21]And he want he says, I'm going for more income, less stress. I think the the NASDAQ 100 drop off is just making them go crazy. He goes, "My QQQI is down. My JPQ's down." He says, "I want higher income, strong cash flow. I want it for retirement. I'm getting rid of these two and I'm moving on." So, we're going to cover exactly what we did and the conversation we went through and how I kind of talked them off the ledge a little bit to show you does his new fund really fit what's asked and or does it do better than QQI or JPQ. Let's get into today's video.

[00:01:04]We do have to do the disclaimer and that is past performances don't guarantee your future results and this information in this video is for educationalformational purposes only. I am not a licensed financial adviser. I am just one who's been studying this stuff for years. The example and suggestions discussed here are basically not suitable for all individual situations. So, always contact a financial advisor before making financial decisions.

[00:01:29]Maximizing income and growth, the new era of covered call ETFs.

[00:01:36]Now, I know sitting around thinking about your financial plans, you're thinking about growth, you're thinking about income. If you've watched my channel, you're thinking about total returns. Well, some of these uh I've covered some of the best ETFs from dividend growth to minimizing risk, but today we're addressing a trend that is impossible to ignore. the explosive rise of highinccome ETFs, specifically where we're looking to fund that breaks that standard lazy playbook to deliver some serious edge. I can get sitting around thinking about this and I know it can be hard to deal with with the the economy like you know just past couple days we had Friday and now we got uh today Tuesday you know things are bouncing around a little bit.

[00:02:30]So the high income playbook, now this is what a lot of companies are really doing is how the cover calls generate premium income while providing downside protection.

[00:02:41]They're holding stocks, long positions in the stocks. Um they're selling the call options or calls on those items to generate that premium income. And when we talk high income, we're talking about 10 plus 10 and a half annual income. Now most cover calls follow a similar script. They sell options uh on to generate that premium. The yields of that 10% or more. They provide steady cash flow. But more importantly, the premium acts as a natural cushion to smooth out volatility and offset price drops if you're not taking that yield to live off of. the income generated from selling those call options can help you with that. You know, basically that downside protection about 15%. It can normally cover about a 10% annual yield.

[00:03:35]Most of them will pay out monthly and the average is 0.56% on the expense ratios.

[00:03:42]Now, the lazy indexing problem.

[00:03:46]Most popular ETFs track the S&P 500 or the NASDAQ 100. their holdings are nearly identical.

[00:03:55]Some try to be different by handpicking select stocks, but many are use what I just call point blank the lazy the selection and the process that lacks that real strategy.

[00:04:09]Standard ETFs have that passive index tracking. You know, they have identical holdings. There's no real strategy coming into play and they just go for high-tech because that's the hottest market out there today. Standouts are going to be actively managed. They have the intentional pairing to what is working and they strategically put that all together. They use a quality focus and they use a balanced exposure. You know, maybe 46% tech uh heavier on some defensive sectors. So, it's really a superior uh situation versus just, you know, anyone can almost buy and sell the the the index. So, it's kind of a lazy package.

[00:04:59]So, the fund that he brought up to me was DV QDVO.

[00:05:04]Um, it's the Amplified Growth and Income ETF. And I kind of chuckle a little bit.

[00:05:08]I said, "Well, we've looked at this one before. We've talked about this one in the past." So, I wanted to get his input of why, you know, why is this fund that he thinks was going to be so great and so spectacular that this is the future of everything, but this one gives you the growth today, the income tomorrow, and the opportunity for the future.

[00:05:33]So, when I sat down and broke down the the fund, I says, "Okay, you're dealing with $715 million of assets. Not bad.

[00:05:42]Um, you have an expense ratio of 0.56, like I said, about average. It has 23 million shares outstanding. It has a dividend of 3.05, which is 9.93%.

[00:05:56]Uh, monthly payouts. Price range is in that mid $30 price range, high of $30.97.

[00:06:04]So, I'm like, this thing's been out August of 2024. So, I'm like, it's got a little bit of time underneath it.

[00:06:12]QDVO's focus on high quality stocks with strong earnings growth and free cash flow. Uh the fund seeks a selective cover call strategy to generate that income while maintaining growth potential. I told I said I'm appreciative of everything you're talking about. I think QDVO is actually a quality fund, but I don't know if it can actually replace QQQI and JPQ.

[00:06:42]Well, here's the situation, too. The explosive growth momentum. Now, this thing I said came out in August of 2024.

[00:06:50]Here we are in April 26, and it broke basically just broke over that $700 million uh point. They're looking at this by October. This could be a million or a billion dollar uh assets under management.

[00:07:07]So the numbers are looking good. The numbers are looking very good. Very nice trajectory. Um the projected area hitting that basically that billion dollar mark. I would be excited than ever that it gets to that point.

[00:07:23]The two pillars and the earning and cash flow. QVDO focuses on two traditional uh traits that matter most in the long term endurance.

[00:07:34]Earnings growth. So, I right off the bat, I'm gonna say these guys are putting uh growth first. Earnings growth signals a company's ability to scale and generate sustainable profits over time.

[00:07:49]The key indicator for operational efficiency and market competitiveness.

[00:07:55]So, what they're trying to find is that 12% year-over-year growth.

[00:08:02]Okay? Okay. And they're trying to get that total revenue and that about $2.4 billion a revenue.

[00:08:08]Okay. So they're trying to find companies that are having that massive growth side of it. Then they also want to find companies that have that free cash flow that provides operational efficiency and the ability to generate cash after accounting for capital appreciations.

[00:08:26]Okay. The cure the critical for dividend sustainability. So they are looking at what the dividends are coming from the stocks that they're going to be buying.

[00:08:39]Well, we started down and we used the same old pattern that I always use and I said, "Okay, let's first off, let's put QDVO up against the uh indexes."

[00:08:50]And right off the bat, in the past month, there's been a huge change. Okay, so you got 11.36% for QQQ.

[00:09:00]You got 5.92% for VO and QDVO is at 6.92.

[00:09:08]So if you're really doing this that you want growth, QQQ would be the way to go.

[00:09:12]Now, if you want some income, well, you're going to have to pick up that, you know, hopefully that 9% falls into play. And we can see that we find the difference between the two. But the key metrics is that recovery rate 15.12% the downward protection of negative 8.5 which means it has the protection to fall 8.5 before you really affect the NAV or anything in that s area. Um the volatility is very low at 12.3.

[00:09:44]When we take a look at QDVO versus QQQ, and I'm showing it to the index first, technology versus technology, they're down a little bit in technology. They're up in communications. They're down in in the consumer cyclical. So, you can see these guys are very, very similar to each other with some fine tuning across the board.

[00:10:11]So, this breaks it down a little bit closer. Exactly what we're talking about in tech exposure. QDVO is at 46%. QQQ is at 55%.

[00:10:22]The defensive sector is at 45% to 32%.

[00:10:27]Actively managed versus non-actively managed. QQQ is just an index. It's going to follow the rules that were set up originally. Expense ratio.56. Not bad for a actively managed fund versus 0.2.

[00:10:41]And then we're taking a yield of 10% versus 0.7.

[00:10:46]So I'm I can see what you're talking about. I can see where you're at up against QQQ, the index. And I can understand where that laziness that came from it.

[00:10:57]And most of it is coming from that defensive side of it, which is the health care, industrials, financials, and the consumer staples.

[00:11:10]Now I'm now we're going up against headtohead. I've heard all about his fund. I've hear what he's talked about.

[00:11:17]I can see the excitement about what he's seeing. But now we're going to go up headtohead um with the other funds.

[00:11:26]Now, Nvidia holdings per fund. QDVO holds 12.4% Nvidia. QQQI 9.8 JPQ 7.2. 2 and QQQ 9.1. So you can see QQQI and QQQ are very similar, very right in line, but this one here is holding more. QDVO is holding more um by about three almost three percentage points more than the other funds.

[00:12:02]So the tactical versus index call writing QDVO uses a tactical strategy choosing specific stocks to write calls against letting others run uncapped. I personally like that type of strategy.

[00:12:19]When you have an actively managed person doing this, they can pay attention exactly what is going on and make things do right as you go through. So the the strategy comparison index wide cap, most funds sell calls on the entire index, which caps the growth on every stock uniformally.

[00:12:44]So the cap grows on all stocks. um the lower premium generation and limited upside potential. When you're selecting the cap, the stock cap, QDBO chooses specific stocks to write calls against, letting the others run uncapped.

[00:13:03]So the selective call writing, higher premium generation, and superior growth.

[00:13:10]So again, another strong piece to QDVO with that active manage. They're making things work out accordingly using it strategywide.

[00:13:25]Now, let's take a look at how they go up against QQI and JPQ. And this one, again, I'm going to have some pluses and minus to this. When we look at the total price return, I backed this over the past month. what's been going on. And you can see QDVO is actually having a better price advantage by it's up 5.94% to 4.88% for QQQI and JPQ is trailing at 2.68.

[00:13:56]So, right off the bat, I can tell you I understand JPQ.

[00:14:00]I don't know that that big of a difference. I'm going to say it's a 1% maybe a hair over 1% difference would make me change from QDVO uh from QQQI and dump it all to get into QDVO. I just be honest with you.

[00:14:17]When I look at total returns though, QQQI is winning 7.39 to 6.92 heavily trailing behind JPQ.

[00:14:31]When we take a look at the total comparison, first off, yield [clears throat] 9.93, growth 17.51, and total return 30.78. This is over the past year. QQQI is giving you more income, 13.5 with a 12.94% growth and a 30.20% 20%.

[00:14:59]JPQ gives you that 10.26, so a little bit higher income and about the equal 2% less on the growth for a little 2% less at 28.72 versus QQI the the whole uh index 0.39 to 39.86%.

[00:15:19]So, as I clearly stated to him, I said, "Look, it if you want growth, why are you not putting everything in the QQQ?"

[00:15:27]And to be honest with them, and and being straightforward with them, I said, "You are actually in this that you need income, but you really want some growth."

[00:15:38]So, what we're going back to is we're picking different pieces to it. If you want income, QQQI is giving you the income. You want growth. Yes, QDVO has the growth, but if you built your portfolio properly, I don't see QDVO taking over for the other two funds.

[00:15:57]Yes, they're performing a little bit better in total numbers, and yes, you're getting a little bit more growth. You're picking up, but you're basically giving up some of your income to get that growth.

[00:16:11]Now, the tax efficiency, this was a great one that that I threw at him. he didn't even have a clue of QDVO distributions are typically reported to the shareholders on a form 1099-div and generally fall into three categories ordinary dividends. Okay, so those are income derivative from underlying stocks held in the portfolio. These stocks are held for a required period and may be classified as qualified dividends which are taxed at lower term uh capital gains rates or they're going to come to you as just ordinary income.

[00:16:50]The capital gains realize gains from the the selling of the stocks or the funds option strategy because UDVO uses covered call strategy writing options.

[00:17:01]as a portion of the income may be treated as short-term capital gains. And then as we see a lot of different funds, return of capital.

[00:17:11]Okay. As reported on the 191 issued, 90% of the distributions were classified as return of capital. So right off the bat, he's he's excited. He was very excited.

[00:17:23]He said, "Look at 90% is return of capital. I only got paid tax on 10%."

[00:17:29]And I'm like, "Did you get your 1099 dividend report yet?" H I I don't know.

[00:17:35]I says, "Let me just share with you one thing." And I did this for him. I broke it down. I got in deep into the company.

[00:17:42]I found out more information. And here's the truth about ROC.

[00:17:49]on QDVO they reported that they did 90% ROC which includes unrealized gains did not account for the fees. It's based on the optimistic uh assumption and on the market it looks great. the final actual report that QDVO gave only 11% of the fund was actually sent out as ROC.

[00:18:22]There's a huge difference there.

[00:18:24]So, don't be misled by inflated numbers.

[00:18:27]The final report is what really matters.

[00:18:30]And the final report said 11% of those distributions were ROC.

[00:18:36]So that actually means 89% of your funds have to either be classified as ordinary income or capital gains.

[00:18:48]I said this one has some tax burden if you're not using it in a Roth, if you're not using it in an IRA. This could hurt a lot of people with unplanning because they're thinking 90% when it was actually only 11.

[00:19:03]So I told him I says the QQQI wins the tax war. I mean they are very very tough and I don't know why more people don't try to do what they do when they use that 1256 contracts using that 6040 capital gains and ROC mix. It is very very difficult to w to beat that side of it with QDVO only doing the ROC and then only coming in at 11% which is more than likely what most people will see. The winner is very clear that QQQI takes that crown for the tax purposes.

[00:19:41]So my game plan I told him I said if I was me you I would not be selling my QQQI because it has a strong income from those option premiums. It is diversified with the NASDAQ 100 because it's not really just doing the index is actually owning the stocks and then it's doing call options on the index. Big difference.

[00:20:04]Favorable tax treatment. proven track record for consistency and the core holdings stay in the portfolio.

[00:20:12]Now, I'm buying QDVO as an add-on for my Roth front. And I put that as maybe. I like the fund. I like what he set up. I like what he saw. I said I would not sell him. Okay, I'm not going to sell my QQQ.

[00:20:29]What I may do is add my QD to my Roth. I like the higher income, but I like that strong total return.

[00:20:38]The higher exposure to growth like from Nvidia and the the tax advantages will work great in a Roth adding the diversification to my income strategy but not replacing it.

[00:20:51]So my strategy would say keep your QQQ, consider adding QDVO, you know, as a Roth add-on.

[00:20:59]Now, the whole answer to it is is I never talked about JPQ because to me, I would be selling my JP JPQ to replace it with QDVO.

[00:21:10]Um, if that's what you're really interested in selling accordingly because I would use JPO same way. I would use it in the Roth and I would use it as a supplement to my QQQI.

[00:21:24]So, let me know what your thoughts are.

[00:21:26]I know I talked them off the ledge.

[00:21:27]We're gonna find out here. I'll probably do a recap on to it. But he was very open. He was after I got all done with it, he said, "You are right. I can see what your point is. QQQI is not as bad as I think it is." And QDVO has definitely beat JPQ. Let me know your comments down below. I'd love to hear from you what your thoughts and how you would answer him. Would you keep QQQI?

[00:21:49]Would you dump it and keep QDVO? Or would you add to it? Let me know your comments below. Hit that like button. It helps the channel the most. And if you're not already, join on and become a subscriber. And best of all, you can always join us on Patreon. Thanks, guys.

[00:22:05]We'll catch you next time.

[00:22:06]>> Thank you for watching. Press.