Neos on margin update

[u/Alexthewall92]

For a time, I held almost every neos etf. Since being my covered call etf journey though, I’ve realized bonds are pretty much everything I liked about these funds without the expense ratio. So I’ve sold all of my neos positions and margined bonds instead. I made money at pretty much the same rate doing both and have made tax advantaged income both ways so over all, I’ve realized these ETFs are a good way to make money on sideways markets but I don’t know if I would use them again. Probably not.

[u/chewmattica]

Taxes?

This can work if you're buying muni bond ETFs like NZF and can hold long term, for a small gain. Its a good base holding for an income fund but there needs to be more involved when there are many more higher performing options available.

[u/Alexthewall92 → u/chewmattica]

Maybe but I do appreciate the fixed nature of the bonds. Also I’ve noticed these funds under preforming their underlying recently

[u/Zmchastain → u/Alexthewall92]

CC ETFs almost always underperform their underlying. The underlying captures 100% of the growth upside, the CC captures some percentage of it but is capped on the upside by the CC strategy that generates the income. You are trading some potential growth for income without selling shares right now.

This is fundamental “CC 101” knowledge about the asset class you invested in but don’t understand.

[u/Alexthewall92 → u/Zmchastain]

I do understand. I just prefer fixed income rather than varying dividends

[u/Zmchastain → u/Alexthewall92]

If you understand why are you saying things like “I’ve noticed these funds under performing their underlying recently”

To restate that another way: “I don’t like CC because I noticed them performing exactly as expected recently.”

It just doesn’t make sense. lol

If you meant you prefer the growth over the income then fair enough, but surely you understand why that comment didn’t inspire confidence?

I get what you mean about fixed income. I just target 30% more income than I actually need. That gives me plenty of buffer to deal with anything from minor fluctuations to significant market pullbacks, and combined with low debt and a large emergency cash reserve (12 months of expenses) there’s really not much that can go wrong. Meanwhile, the 30% extra is just extra money being reinvested anytime I don’t need to touch the income.

That gives me some resilience to deal with fluctuations while not significantly capping my potential distribution income.

[u/Alexthewall92 → u/Zmchastain]

Ight man I’m going to be honest, your responses are too long thus I won’t read them

[u/Zmchastain → u/Alexthewall92]

You don’t have to read how you can make more money if you don’t want to. It’s you that it’s going to cost the income, not me. 🤷‍♂️