Yes! Great interview. This fund gets the most undeserved criticism based on the misunderstanding of return of capital. I love this fund and it’s my second biggest holding. Will happily keep buying while others wrongly dismiss it
Agreed, too many investors think ROC is only "they are paying me back my money" whereas first and foremost, ROC is a tax treatment of distributions (following the tax rules).
Thank you for following up with this great interview. I have a sizable position in this ETF and was a little concerned after watching your past videos on this ETF. This really clears some things up for me. I love that they don't do cover calls on 100% of the portfolio and that they do 1 to 4% out of the money. Not to mention the tax benefits. Thank you!
I added SPYI to my portfolio recently. I appreciate how you go right to the source and dig in for us to learn what they are all about. It helps make a better educated decision.
That feedback is helpful. I think we should question everything. Sometimes we draw the wrong conclusions. But as long as we keep searching we’ll eventually get to the truth.
That was an excellent interview. I truly appreciate your approach in asking direct questions without pandering to your guest. I also applaud your willingness to acknowledge your prior misunderstanding of information with regard to this fund. With this approach you present yourself and your channel with enormously more credibility than other channels who approach their interviews like a celebrity fan interview. Thank you for the informative interview.
Thanks for sharing those thoughts. I agree 100%. I don’t want to watch a 30 minute commercial. I think some UA-camrs are worried that they won’t get any more fund managers if they ask challenging questions. My primary motivation is to get the information to make investment decisions not to look clever.
Excellent interview. Thank you not just asking softball questions. It was great hearing from one of the fund managers in person. I’m much better educated about this fund and now will definitely consider it.
Great interview. Thanks for bringing these insights to us. I love your videos and your no "click bait" style nonsense video titles. It attracts the right serious investors. Your channel keeps it real fact based analysis without "How to Make $5000 per month" type bs. Also the FB community is great! Thanks!
You have an excellent channel, with thorough analysis. I respect the fact that you are interviewing these managers even though you may not be on board with their funds
Great interview. This was badly needed. I personally like this fund and have zero issues with ROC provided total returns are good relative to volatility and the S&P 500.
@@armchairincomechannel I agree. It did look odd. But I’ve been looking for a fund similar to this for years. Ideally, I want a fund that tracks the S&P 500, has low fees, and pays 5% dividend - with 1.5% on qualified dividends and 3.5% in ROC. This would allow total distributions of $200k+ with zero immediate federal tax hit. As long as the total return is fine, ROC gives tax flexibility.
Really glad you had this interview, as I had gone pretty deep into the stock before I saw your "return of capital" video. I sold big time(sell now ask questions later kind of thinking). I owned it in an IRA but will rebuy in my taxable account to take advantage of the return of capital tax advantage. Really enjoy your videos as I am in the same position you are, retired, manage most of my own money etc.
Thanks for letting me know and sorry about the U Turn! I wanted to like it back in June but so many weird things...that turned out to be OK. Welcome to the retired club :) If you're not already in the Armchair Income Community, here's a link: facebook.com/groups/1960447914286446/
Excellent video and much thanks for creating this. I was on the fence about investing in SPYI, mainly because of the return on capital. I feel like that issue was cleared up during your interview with Mr. Paolella. I think I will tip toe in to SPYI over the next few months. Thanks again!
Thanks for your feedback and strategy. Your suggestion creates a nice blend of income and growth. Personally, I like to diversify more than that, but I get your point.
Great interview. You did the fund a favor by asking the questions that cause hesitancy in investing and he was refreshingly transparent in his answers. One interesting new wrinkle-he referred to “the model” more than once. It would be interesting to probe on the algo. Is the algo dynamic, does it pick the stocks not to cover? How much choice do the mgrs actually make in actively managing and is the approach to using a model & managing different than NUSI?
SPYI is a great fund! Stable NAV and dividend. Just purchased QQQI yesterday, there are others funds that pay higher dividends, but with a depreciation of NAV.
I actually played this video twice, well done! You brought some serious credibility to yourself and your channel when you did this. My only question now is, are you buying any SPYI? 😊
Thank you for sharing your portfolio and being such an honest and well researched interviewer. I wish you so much success with your channel and investing. You are really amazing. You are my role model. I just started by journey but I would love to be as knowledgeable as you. In your past life, were you involved in finance and investing or is it just self taught. How did you learn so much?
Thanks for the feedback and I'm glad the channel is helpful for you. I've invested in the stock market for most of my life. My career was in commercial real estate. I ran through it about 2 minutes into this video: ua-cam.com/video/i5n5_8Wqh8Q/v-deo.html
Fantastic video.. you should be a financial interviewer, I really liked this.. I had some of the same questions about SPYI as it has become a larger of my taxable holding.. great work! I have been doing this strategy myself using the wheel for a long time.. my returns were on par with this, so Im taking a break from it and see if SPYI can do the work for me..
Great video. Thank you for doing this. For next time, i think you may have let him off the hook when discussing expectations in different market conditions. To me it seems he missed discussing what would happen during a large quick market downturn in S&P. For example what happened to NUSI during 2022. My thought is that once the fund goes down by such a large amount it may never get back to the pre-crash levels even if the overall market has already. I really want to see how SPYI does during the next major downturn before jumping in too far on this ETF.
That's a good question. I think generally, a sharp downturn followed by a sharp recovery (like March 2020) is a relatively bad scenario for covered call funds. Just a question of how ofter that happens and how bad it is.
He mentioned something similar and stated they would sell ATM calls...but it would have been useful to know what the model is trained to do in a sharp downfall. Active funds should be better managed in those situations in theory.
Thank you for another great video to shine lights at the details of SPYI ETF. One drawback of SPYI compared to JEPI and XYLD is that there are no options trading for it. Usually, I sell puts to get into these funds. I pick a somewhat longer expiration date and a lower strick price. This way, I either get in at a lower price or collect premium plus the ~5% interest cash on my money while I'm waiting. I do that with JEPI all the time. When will SPYI itself be available for options trading?
Thanks for sharing. That’s an excellent strategy. I don’t think SPYI trading volume is high enough yet for a liquid options market but it’s likely to get there.
What I would like to understand better is the return of capital issue. I would like to see for example, if I invested $10,000 in SPYI & sold it 2 years later for 12,000, would my long term capital gain be $2,000 or would it be something greater due to the way return of capital is treated...anyone out there want to answer this?
Glad you enjoyed it! I appreciate your feedback. I’ll continue to look for fund managers willing to answer directly and openly. It’s more interesting than watching a promotion video 😀.
Another very well rounded interview, thank you 👏. It would be nice if you could add time stamps or maybe indicate where to skip the tax part in your videos? Taxes are not the same in all countries, and I’m sure many of us have those funds in non taxable accounts. Just a suggestion, not a criticism!
Missed opportunity: to ask how they manage the written calls. Do they just let them expire or be assigned or do they buy to close them ever? Do they roll them ever? Etc
If i am using SPYI as part of a portfolio to produce income to live on i do not consider it to under perform in bull markets, because i can not live off of unrealized returns from capital appreciation. I just would not want any covered call ETF etc to have the price in a constant down trend, sideways or up overall with steady distributions is all good.
I agree. Watching the performance over the past year and listening to Garrett’s answers has changed my opinion of SPYI to the positive. If the yield is high enough, I don’t need growth.
This could be a game changer for this particular ETF with regard to tax treatment and calling this out on a taxpayers Form 6781! In fact, before i buy SPYI in my taxable account, i'd REALLY like to wait to see your follow up on what NEOS will provide on their website in this regard. As described, this could be the SOLE covered-call ETF with favorable tax treatment to this level.
I agree that the tax advantageous are worth noting. Overall, my opinion of this fund has improved dramatically in recent months so I'll make an update video shortly. As for allocation, I'm a diversifier so I like to spread the risk among many funds (and a few stocks too).
Very informative interview! Thank you so much. I can’t say that I understood everything in the video but it is reassuring to see the fund manager give detail explanation of their strategy, which I agreed with! I will be keeping an eye on SPYI and add more when opportunities arise.
Question about the return of capital strategy for tax purposes. The vast majority of my investments are in a tax deferred account so this strategy does not help me. My question is does this strategy reduce my total return as opposed to a fund that does not utilize tax loss harvesting?
That's a good question, I'm in a similar situation. My intuition says no, but I'm not an accountant. I'll keep that one in my pocket for another interview.
Roc by closed end funds than is like a refund for failing but with spyi its a label given to tax loss pairing just reducing cost basis if and when you sell but no return of principle?
That's correct. I'm not sure if "tax loss pairing" is the correct term but the concept is accurate. 2 different ROC concepts that sound the same but are actually quite different. The tax code is unnecessarily confusing.
@@armchairincomechannel pairing losses with gains labeled roc is what i meant Loved your video on Main caputal as well Love to see your take on Realty income stock too if youv'e got the time Thanx
They're settled for cash. Here's a quote from page 5 of the Prospectus: The Fund focuses primarily on SPX call options which offer both European settlement (i.e., options can only be exercised at their expiration date) and cash settlement (i.e., options carry an obligation by their seller to pay the difference between their strike price and their settlement value instead of allowing the seller to take delivery of securities). www.sec.gov/Archives/edgar/data/1848758/000183988222011065/shp-485apos_052322.htm
@@armchairincomechannel thanks. I think I understood that. So, if the option they sold expires itm, they can pay the buyer off and keep the stock? Or is this when they would just buy the next strike.
Downloading info from custodial broker toi turbo tax or h and r block or other tax service will give them all the roc info they need to do ur ur return i assume Correct?
Interesting mix. Goldman is a bit new for me. QQQI is new but the strategy is a carbon copy of SPYI so that increases my comfort level...still easing into it slowly though.
If the dividend is classified as ROC, you may get a tax break in the short term, but it reduces your cost basis in the shares owned. When you eventually sell the shares, you’ll have a big capital gains tax due.
That's true. So it depends on whether you pay a higher rate on ordinary income or capital gains. Most people pay less on capital gains, especially long term capital gains.
@@armchairincomechannel True, the capital gains tax rate is usually less. What I was trying to say was that, after many years of ROC, your cost basis may be close to $0, so the sales price is almost all a capital gain. Even though the tax rate may be lower, it’s all due that year. A similar thing happened or me with Kinder Morgan a few years back. When Richard Kinder decided to take KMI from being an MLP to being a regular corp, I was forced to sell my units, with a very low cost basis (because of depreciation) and got a huge tax bill because of it (recapture of depreciated asset).
That's true. If I was subject to a large capital gains tax exposure, I'd rather it be for an income fund than a growth fund, as the growth fund doesn't do anything for me until I sell it.
I file my taxes with Turbo tax in conjunction with my fidelity brokerage account. Will turbo tax understand everything he just said about the tax issues with SPYI? Also is this ETF good for my IRA or my investment account. Appreciate the info and great video as always.
Unfortunately these tax questions are for a tax accountant and/or Fidelity. I've never used Turbo tax so I can't share any experience with it, and I'm not a tax advisor. What I can tell you is that the return of capital tax treatment is not unique to the NEOS SPYI fund. The same tax treatment is given by funds from Eaton Vance and Global X (eg QYLD).
I use TurboTax …yes …you get a composite 1099 from your brokerage…neos reports all this to your broker …the 1099 if you read it will show the roc ….they usually refer to it as a non taxable amount…but bottom line is TurboTax imports it all and allocates it properly…that has been my experience for many years.
I want to see how spyi recover from a 30-40%down bear market compare to qyld. Qyld is a no buy for me. And the capital loss does not make a big change on the dividend right? Because most of the dividend come from selling call? Am i right?
SPYI's recovery from a 30-40% bear market would depend on the speed of the market's recovery. It would recover at a similar rate to the market if the market recovers slowly. It would recover much more slowly than the market if the market recovers quickly. QYLD is based on the NASDAQ so XYLD, which is based on the S&P 500 would be a fairer comparison. SPYI would recover more quickly than XYLD because it doesn't sell calls on 100% of the portfolio and it doesn't sell at the money calls. The dividend is a function of the total value of the fund's portfolio (if the portfolio drops by 50% then the dividend will fall), as well as the volatility...which drives option prices.
JEPI includes value in its stock selection criteria (versus growth) so it should do better during a market correction. Therefore, the argument to hold it would be to smooth out some volatility in a portfolio vs holding a fund that strictly mirrors the S&P 500.
I am surprised ''Armchair Income'' is not growing faster...We need to comment on other not as good Vlog's. BMEZ at new low, 12.2% distribution and 19.7% discount. the CEF rule "solid fund should be bought at 20% discount'' is encouraging me to fill out my position. VZ in solid base. Maybe value investing will have a moment in the sun. Good Luck
Thanks for your encouraging words. The channel gained 2,000 subs in the last 30 days...so making some progress. If people were to spread the word about Armchair Income, it would be appreciated...as long as it's done with respect, of course! BMEZ looks interesting, I'll take a look, thanks.
As of today December 10th 2023 SPYI is up 3.86% (YTD) + 8.66% dividend = +12.52% SPY is up 20.34% (YTD) + 1.43% dividend = +21.77%. The 'face ripper' rally (like the one of the last 6 weeks) caused SPYI to underperform significantly, which makes it no good for volatile environment. 😢
That's correct. Covered call funds do worst when the market is ripping. That's why I don't put 100% of my assets into them. When the market is trading sideways, SPYI will outperform SPY. Most of the time, SPY will create the highest total return, but it doesn't send you cash each month to pay the bills...you have to know when to sell it at highs do something else when it's down (like 2022)...that's not ideal if you're retired.
@armchairincomechannel I am retired, and what is ideal for me is to get in a trade that has the highest probability for profit, which I periodically take out. Being retired doesn't mean you need to get paid every month. I take profits only 3 or 4 times a year, but they are big enough to pay for everything (I prepay mortgage for months). 'Short vix', ZIVB is paying for my retirement rn. It's up 50% for only 8 months, which means I can withdraw 30% of the Net Liquidation Value of my position and have the same amount of money left invested in it like I had 8 months ago.
The more disciplined you are, the less frequent you need to receive distributions. Some people favor monthly payouts, I'm ok with quarterly or monthly. Sounds like you are ok with less frequent than that.
It would lower your tax burden but SPYI already more tax efficient than most competitors because it distributes a high percentage of return of capital which is taxed as capital gain rather than income. A Roth is usually used for the least tax efficient investments.
I'm not qualified to give tax advice but in general terms..a Roth IRA allows you to contribute after tax dollars and your earnings grow tax free, after which they can be withdrawn after age 59 1/2. Based on that explanation (sourced from Schwab) the answer is "yes".
In short, I'll do nothing. We had a sharp sell off and recovery in August and there was no loss. If there selloff lasted longer than the option duration (approx 6 weeks), and the recovery was faster/greater than the out of the money rate for teh options then yes, SPYI would recover less than SPY. Every investment has risk.
@@armchairincomechannel I'm in the same shoes as you. 52 thinking of doing early retirement. trying to plan high paying div. to replace my income. I have invested in high paying div. etf.. its working so far.. hope it stays this way.. keep up the great work you do!
I can't speak for your Australian tax obligation, but for the US tax obligation it is beneficial because a large percentage of the distribution shifts from taxable income to non-taxable capital gain. That's assuming you file a tax return with the IRS. If you don't bother to file a return wtih the IRS, then you'll have dividend withholding deducted at the same rate for every income investment and no chance of a refund.
Soooo... is it qualified or ordinary🤔.... sounds like a good portion of it is qualified but is it still honestly tax-efficient.. right now I have DGRO & SCHD... and would love to add one more qualified etf to my profolio but I don't want to add something that's going to kill me in taxes😂... thanks for your time guys
We won't have an accurate breakdown of the tax treatment until the end of year tax statements are issued, but in broad terms, the majority is Return of Capital, which will lower the cost basis then be tax on sale as capital gains. The minority will be dividends from S&P 500 companies, which will be a combination of ordinary and qualified dividends. Thanks for watching.
It can be good or bad. No income tax due but your cost basis is lowered, and capital gains tax is due when you sell...if you sell.....There's no free lunch but its a better tax scenario for most people.
I am more interested in the money they really earned with their strategy on a monthly basis, rather than what they distribute. In other words I want to see the pay out ratio. Taxes saved are payments out of the pockets of us taxpayers. Doesn´t say anything about their strategy or investment results. My 50c.
You raised an important question. I’ll address it in a future video. Most of their return comes from the distribution. If they distribute their assets then those distributions aren’t net returns. It’s an ETF so the NAV equals the price. The NAV has been flat, despite high, consistent distributions. In other words, it hasn’t eroded, which was my concern. It’s still a young fund but at this point it’s on track with its objective to produce income and keep up with SPY in total returns (or almost keep up).
@@armchairincomechannel Thank you for picking up my remarks. You are right total return is on track given the implied strategic limitation when the underlying is going up quickly, what happened this summer. However, I would propose they increase transparency big time. They still do not give clear picture what part of their different tactical instruments , i.e. buying calls, selling calls etc. has contributed how much to the monthly result. In short, I am missing a monthly P&L statement by the instruments used. Why can´t they tell us what they do or did? What went good, what failed, and why? Compare it to the way better transparency of yieldmax.
Beware! SPYI only paid my first dividend- then they just stopped paying dividends. I sold SPYI right away. If you live outside the US: the US tax will take 30% of your dividend payments! Recieving only the first dividend and then loosing 30% of the dividend to the US tax...no thank you!
If you didn't receive dividends, contact your broker and ask them to resolve. I've received my SPYI dividends, as has everybody in the Armchair Community. Regarding withholding tax at 30%, that's the default setting for every US stock and has nothing to do with SPYI. If you haven't already, check to see if your country has a tax treaty with the US and if that tax treaty entitles you to a lower rate of withholding. Many countries have rates as low as 15%. Lastly, the actual taxable amount you owe is almost certain to be far less than 30%, so if you file a tax return with the IRS, you are likely to receive a refund.
You're welcome. Sorry to hear about the glitch and hope its resolved soon. If you haven't looked at Interactive Brokers, they're good for Non-US accounts and familiar the reduction of withholding taxes based on tax treaties.
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My God this guy is fantastic
Small channel yet does empirical research of companies and gets interviews plus does follow up on his videos
Thanks for those kind words. Maybe one day my small channel will be a medium sized channel. A guy can dream 😏.
Yes! Great interview. This fund gets the most undeserved criticism based on the misunderstanding of return of capital. I love this fund and it’s my second biggest holding. Will happily keep buying while others wrongly dismiss it
Thanks! I think it will benefit from their new efforts to distribute helpful information.
What is your first?
Agreed, too many investors think ROC is only "they are paying me back my money" whereas first and foremost, ROC is a tax treatment of distributions (following the tax rules).
Thank you for following up with this great interview. I have a sizable position in this ETF and was a little concerned after watching your past videos on this ETF. This really clears some things up for me. I love that they don't do cover calls on 100% of the portfolio and that they do 1 to 4% out of the money. Not to mention the tax benefits. Thank you!
I'm glad Garrett's answers were able to provide you with some clarity. I learned a lot too!
i like that you talk directly to fund managers, subscribed
Thanks! I've requested more interviews with other fund managers so hopefully more of these to come.
Thank you for taking the time to interview and thank you Garrett for coming on - I was hoping for an interview with the folks behind SPYI!!!
Thanks for watching it so soon after posting. Glad you enjoyed it.
I added SPYI to my portfolio recently. I appreciate how you go right to the source and dig in for us to learn what they are all about. It helps make a better educated decision.
That feedback is helpful. I think we should question everything. Sometimes we draw the wrong conclusions. But as long as we keep searching we’ll eventually get to the truth.
These interviews have been fantastic, thank you! 👍🏼
Glad you like them, it makes a nice change from talking solo.
Standing ovation! This was a fair follow-up piece and interview. Thank you for organizing and putting this out.
Wow 🤩. Never had a standing ovation before. Thanks for typing such kind words. I appreciate it!
That was an excellent interview. I truly appreciate your approach in asking direct questions without pandering to your guest. I also applaud your willingness to acknowledge your prior misunderstanding of information with regard to this fund. With this approach you present yourself and your channel with enormously more credibility than other channels who approach their interviews like a celebrity fan interview. Thank you for the informative interview.
Thanks for sharing those thoughts. I agree 100%. I don’t want to watch a 30 minute commercial. I think some UA-camrs are worried that they won’t get any more fund managers if they ask challenging questions. My primary motivation is to get the information to make investment decisions not to look clever.
Excellent interview. Thank you not just asking softball questions. It was great hearing from one of the fund managers in person. I’m much better educated about this fund and now will definitely consider it.
Glad you enjoyed it! I come from the same perspective. As an investor I want to know the downsides. The upsides are obvious.
Great interview. Thanks for bringing these insights to us. I love your videos and your no "click bait" style nonsense video titles. It attracts the right serious investors. Your channel keeps it real fact based analysis without "How to Make $5000 per month" type bs. Also the FB community is great! Thanks!
Thanks for your feedback. I hate clickbait as much as you do :)
Whatever you do.......keep at it. I devoured about 10 of your videos the past 3 days.......REALLY.......owesome content 😊
Thank you so much 😀 I appreciate your encouragement!
I’ve seen this interview and one with JEPIs fund manager. I like them both but I feel a bit more relaxed with Garrett.
Thank you for the interview!
Glad you enjoyed it, and thanks for your feedback :)
You have an excellent channel, with thorough analysis. I respect the fact that you are interviewing these managers even though you may not be on board with their funds
Thanks. I appreciate your feedback.
Great interview. This was badly needed. I personally like this fund and have zero issues with ROC provided total returns are good relative to volatility and the S&P 500.
Thanks for the feedback. I don’t mind some ROC in small doses but when it’s 90% of the distribution I need answers and Garrett delivered!
@@armchairincomechannel
I agree. It did look odd. But I’ve been looking for a fund similar to this for years. Ideally, I want a fund that tracks the S&P 500, has low fees, and pays 5% dividend - with 1.5% on qualified dividends and 3.5% in ROC. This would allow total distributions of $200k+ with zero immediate federal tax hit. As long as the total return is fine, ROC gives tax flexibility.
Really glad you had this interview, as I had gone pretty deep into the stock before I saw your "return of capital" video. I sold big time(sell now ask questions later kind of thinking). I owned it in an IRA but will rebuy in my taxable account to take advantage of the return of capital tax advantage. Really enjoy your videos as I am in the same position you are, retired, manage most of my own money etc.
Thanks for letting me know and sorry about the U Turn! I wanted to like it back in June but so many weird things...that turned out to be OK. Welcome to the retired club :) If you're not already in the Armchair Income Community, here's a link: facebook.com/groups/1960447914286446/
Excellent video and much thanks for creating this. I was on the fence about investing in SPYI, mainly because of the return on capital. I feel like that issue was cleared up during your interview with Mr. Paolella. I think I will tip toe in to SPYI over the next few months. Thanks again!
I'm glad you found it useful. I learned a lot too.
Another excellent video. I hope to see more interviews like this in the future.
Thanks! That's an old one. Plenty more like that in the back catalog, and many more to come!
@@armchairincomechannel I am watching as many of your videos as I can. I look forward to more interviews.
Great video! Exactly what we needed. Now we just need a NASDAQ version.
It's a logical progresssion!
QQQI
You asked all the questions that I needed to know. Thanks!
Glad it was helpful!
Incredible interview! Loved the questions you asked as well as the answers by Garrett. Keep it up!
Glad you enjoyed it! Thanks for the encouragement 😀
Excellent interview. Garrett presents himself well with his well designed fund. My needs suggest a 60% SPYI 40% VOO buy for long term hold.
Thanks for your feedback and strategy. Your suggestion creates a nice blend of income and growth. Personally, I like to diversify more than that, but I get your point.
Great interview. You did the fund a favor by asking the questions that cause hesitancy in investing and he was refreshingly transparent in his answers. One interesting new wrinkle-he referred to “the model” more than once. It would be interesting to probe on the algo. Is the algo dynamic, does it pick the stocks not to cover? How much choice do the mgrs actually make in actively managing and is the approach to using a model & managing different than NUSI?
Thanks Jim. Those are good questions for a future interview.
SPYI is a great fund! Stable NAV and dividend.
Just purchased QQQI yesterday, there are others funds that pay higher dividends, but with a depreciation of NAV.
I agree. Also, expect a QQQI video later this month :)
I actually played this video twice, well done! You brought some serious credibility to yourself and your channel when you did this. My only question now is, are you buying any SPYI? 😊
Twice is nice! I'll address that question in a future video but between you and me...yes :)
Top notch stuff! Thanks for the interview and info.
Glad you enjoyed it. I appreciate your feedback. It’s good motivation while doing the behind the scenes work. 😀.
I like this fund more and more. Thanks for the information 👍
More to come! Glad you enjoyed it. 😀
Thank you for sharing your portfolio and being such an honest and well researched interviewer. I wish you so much success with your channel and investing. You are really amazing. You are my role model. I just started by journey but I would love to be as knowledgeable as you. In your past life, were you involved in finance and investing or is it just self taught. How did you learn so much?
Thanks for the feedback and I'm glad the channel is helpful for you. I've invested in the stock market for most of my life. My career was in commercial real estate. I ran through it about 2 minutes into this video: ua-cam.com/video/i5n5_8Wqh8Q/v-deo.html
Fantastic video.. you should be a financial interviewer, I really liked this.. I had some of the same questions about SPYI as it has become a larger of my taxable holding.. great work! I have been doing this strategy myself using the wheel for a long time.. my returns were on par with this, so Im taking a break from it and see if SPYI can do the work for me..
Glad you enjoyed it, and thanks for the feedback. I hope to do many more interviews in the future.
Great video. Thank you for doing this. For next time, i think you may have let him off the hook when discussing expectations in different market conditions. To me it seems he missed discussing what would happen during a large quick market downturn in S&P. For example what happened to NUSI during 2022. My thought is that once the fund goes down by such a large amount it may never get back to the pre-crash levels even if the overall market has already. I really want to see how SPYI does during the next major downturn before jumping in too far on this ETF.
That's a good question. I think generally, a sharp downturn followed by a sharp recovery (like March 2020) is a relatively bad scenario for covered call funds. Just a question of how ofter that happens and how bad it is.
He mentioned something similar and stated they would sell ATM calls...but it would have been useful to know what the model is trained to do in a sharp downfall. Active funds should be better managed in those situations in theory.
Thank you for another great video to shine lights at the details of SPYI ETF. One drawback of SPYI compared to JEPI and XYLD is that there are no options trading for it. Usually, I sell puts to get into these funds. I pick a somewhat longer expiration date and a lower strick price. This way, I either get in at a lower price or collect premium plus the ~5% interest cash on my money while I'm waiting. I do that with JEPI all the time. When will SPYI itself be available for options trading?
Thanks for sharing. That’s an excellent strategy. I don’t think SPYI trading volume is high enough yet for a liquid options market but it’s likely to get there.
What I would like to understand better is the return of capital issue. I would like to see for example, if I invested $10,000 in SPYI & sold it 2 years later for 12,000, would my long term capital gain be $2,000 or would it be something greater due to the way return of capital is treated...anyone out there want to answer this?
It would be greater. The ROC you received would lower your cost basis below 10k.
Great job on the interview. Tough questions asked and good answers given. Thanks again
Glad you enjoyed it! I appreciate your feedback. I’ll continue to look for fund managers willing to answer directly and openly. It’s more interesting than watching a promotion video 😀.
Awesome video! Thanks to you and Garrett. I will pick some up soon.
Glad you found it useful, thanks for letting me know.
Another very well rounded interview, thank you 👏. It would be nice if you could add time stamps or maybe indicate where to skip the tax part in your videos? Taxes are not the same in all countries, and I’m sure many of us have those funds in non taxable accounts. Just a suggestion, not a criticism!
Thanks for the suggestion. I have a limited patience for tax info too! I’ll try time stamps next time. Good idea 👍🏼
More info on QQQI
It’s in the works. Should be ready this month.
Missed opportunity: to ask how they manage the written calls. Do they just let them expire or be assigned or do they buy to close them ever? Do they roll them ever? Etc
Thanks for the feedback.
If i am using SPYI as part of a portfolio to produce income to live on i do not consider it to under perform in bull markets, because i can not live off of unrealized returns from capital appreciation. I just would not want any covered call ETF etc to have the price in a constant down trend, sideways or up overall with steady distributions is all good.
I agree. Watching the performance over the past year and listening to Garrett’s answers has changed my opinion of SPYI to the positive. If the yield is high enough, I don’t need growth.
This could be a game changer for this particular ETF with regard to tax treatment and calling this out on a taxpayers Form 6781! In fact, before i buy SPYI in my taxable account, i'd REALLY like to wait to see your follow up on what NEOS will provide on their website in this regard. As described, this could be the SOLE covered-call ETF with favorable tax treatment to this level.
I agree that the tax advantageous are worth noting. Overall, my opinion of this fund has improved dramatically in recent months so I'll make an update video shortly. As for allocation, I'm a diversifier so I like to spread the risk among many funds (and a few stocks too).
Do they sell covere😮d cslls on. Indiv stocks or just spx options ?
Very informative interview! Thank you so much. I can’t say that I understood everything in the video but it is reassuring to see the fund manager give detail explanation of their strategy, which I agreed with! I will be keeping an eye on SPYI and add more when opportunities arise.
Glad it was helpful! There are a lot of moving parts to follow, especially as it relates to options. I plan to break those down in a future video.
This is another wonderful video. I will now do my research, Thanks so much!
Always makes me happy when people do their own research instead of just buying based on tips. Thanks for your supportive feedback 😀
Will be opening up a substantial position in SPYI. Just waiting for a 5-7% pullback in the market.
Thanks for sharing your strategy!
Question about the return of capital strategy for tax purposes. The vast majority of my investments are in a tax deferred account so this strategy does not help me. My question is does this strategy reduce my total return as opposed to a fund that does not utilize tax loss harvesting?
That's a good question, I'm in a similar situation. My intuition says no, but I'm not an accountant. I'll keep that one in my pocket for another interview.
Another great video Mark, much appreciated.
Thanks. By the way…who’s Mark?
@@armchairincomechannel sorry my friend, thought i remembered from somewhere that was your name. Embarrassing. 🤦🤦🤦
lol. No problemo. Have a great day Jeff!..I mean Adrian...never mind ;)
@@armchairincomechannel lol thank you Tom. 😉
interesting I own jepq & jepi. Their distribution seems much more consistent.
I thought that was interesting too! I like all 3.
That is true
Roc by closed end funds than is like a refund for failing but with spyi its a label given to tax loss pairing just reducing cost basis if and when you sell but no return of principle?
That's correct. I'm not sure if "tax loss pairing" is the correct term but the concept is accurate. 2 different ROC concepts that sound the same but are actually quite different. The tax code is unnecessarily confusing.
@@armchairincomechannel pairing losses with gains labeled roc is what i meant Loved your video on Main caputal as well Love to see your take on Realty income stock too if youv'e got the time Thanx
Reduced my JEPI stocks by half and invested it in SPYI, feels just right for me.
Thanks for sharing your insight.
I wonder what their losses are that they are carrying forward to use this strategy
They're trading options and the S&P 500. Sometimes, 1 or both of those will experience a loss within the 45 day average duration of the options.
Fabulous interview. The tax treatment explanation makes sense, which will help SPYI’s after-tax performance relative to JEPI.
Thanks for your feedback. The tax makes a big difference for some people.
Thanks! That was very useful and informative!
Glad it was helpful! Thanks for watching and letting me know what you think.
Great update, gives me more confidence to continue with spyi
Glad you found it helpful, thanks for letting me know :)
What happens when the shares get called away? They buy them back or do they sell a put?
They're settled for cash. Here's a quote from page 5 of the Prospectus: The Fund focuses primarily on SPX call options which offer both European settlement (i.e., options can only be exercised at their expiration date) and cash settlement (i.e., options carry an obligation by their seller to pay the difference between their strike price and their settlement value instead of allowing the seller to take delivery of securities). www.sec.gov/Archives/edgar/data/1848758/000183988222011065/shp-485apos_052322.htm
@@armchairincomechannel thanks. I think I understood that. So, if the option they sold expires itm, they can pay the buyer off and keep the stock? Or is this when they would just buy the next strike.
Downloading info from custodial broker toi turbo tax or h and r block or other tax service will give them all the roc info they need to do ur ur return i assume Correct?
Yes, but I would also download the tax form from the NEOS website and give that to your tax accountant as it explains the ROC.
Armchair you are the goat my guy
Thanks! I think Roger Federer is the goat, but to each his own :) That made my day, much appreciated.
@@armchairincomechannel carlitooo alcaraz is on the hunt haha
He has all the tools if he can stay healthy.
Another excellent interview
Thanks
Thanks for your feedback, glad you liked it!
Will you be doing a new video on SPYI now that you've got this new info?
It's like you're reading my mind :) Yes, it's in the works and should be ready before the end of the month.
o yea i love SPYI.. thats a huge part of my portfolio
Thanks for the feedback and glad it’s working for you.
Would love to see QQQI dig down as well, these funds seem to be the best of all worlds perhaps a mix with Goldman new funds gpix and gpiq and svol 😬
Interesting mix. Goldman is a bit new for me. QQQI is new but the strategy is a carbon copy of SPYI so that increases my comfort level...still easing into it slowly though.
If the dividend is classified as ROC, you may get a tax break in the short term, but it reduces your cost basis in the shares owned. When you eventually sell the shares, you’ll have a big capital gains tax due.
That's true. So it depends on whether you pay a higher rate on ordinary income or capital gains. Most people pay less on capital gains, especially long term capital gains.
@@armchairincomechannel True, the capital gains tax rate is usually less. What I was trying to say was that, after many years of ROC, your cost basis may be close to $0, so the sales price is almost all a capital gain. Even though the tax rate may be lower, it’s all due that year.
A similar thing happened or me with Kinder Morgan a few years back. When Richard Kinder decided to take KMI from being an MLP to being a regular corp, I was forced to sell my units, with a very low cost basis (because of depreciation) and got a huge tax bill because of it (recapture of depreciated asset).
That's true. If I was subject to a large capital gains tax exposure, I'd rather it be for an income fund than a growth fund, as the growth fund doesn't do anything for me until I sell it.
I file my taxes with Turbo tax in conjunction with my fidelity brokerage account. Will turbo tax understand everything he just said about the tax issues with SPYI?
Also is this ETF good for my IRA or my investment account. Appreciate the info and great video as always.
Unfortunately these tax questions are for a tax accountant and/or Fidelity. I've never used Turbo tax so I can't share any experience with it, and I'm not a tax advisor. What I can tell you is that the return of capital tax treatment is not unique to the NEOS SPYI fund. The same tax treatment is given by funds from Eaton Vance and Global X (eg QYLD).
I use TurboTax …yes …you get a composite 1099 from your brokerage…neos reports all this to your broker …the 1099 if you read it will show the roc ….they usually refer to it as a non taxable amount…but bottom line is TurboTax imports it all and allocates it properly…that has been my experience for many years.
I want to see how spyi recover from a 30-40%down bear market compare to qyld. Qyld is a no buy for me. And the capital loss does not make a big change on the dividend right? Because most of the dividend come from selling call? Am i right?
SPYI's recovery from a 30-40% bear market would depend on the speed of the market's recovery. It would recover at a similar rate to the market if the market recovers slowly. It would recover much more slowly than the market if the market recovers quickly. QYLD is based on the NASDAQ so XYLD, which is based on the S&P 500 would be a fairer comparison. SPYI would recover more quickly than XYLD because it doesn't sell calls on 100% of the portfolio and it doesn't sell at the money calls. The dividend is a function of the total value of the fund's portfolio (if the portfolio drops by 50% then the dividend will fall), as well as the volatility...which drives option prices.
Love SPYI. Consistently hitting 1% of monthly valuation in dividends on a regular monthly schedule is excellent.
It works for me too. Thanks for watching.
Options premiums have dropped significantly but SPYI keeps paying similar amounts. I’ll pass.
I had exactly the same concern so I asked that question fairly early on in the interview.
@@armchairincomechannelhi I’m sorry can you tell us at what time stamp you asked that question? I’ll relook at the video though
Did he just comment on a video? How did you find him?
Garrett? Via email. The old fashioned way.
What’s the advantage of holding JEPI? What do y’all think?
JEPI includes value in its stock selection criteria (versus growth) so it should do better during a market correction. Therefore, the argument to hold it would be to smooth out some volatility in a portfolio vs holding a fund that strictly mirrors the S&P 500.
I am surprised ''Armchair Income'' is not growing faster...We need to comment on other not as good Vlog's.
BMEZ at new low, 12.2% distribution and 19.7% discount. the CEF rule "solid fund should be bought at 20% discount'' is encouraging me to fill out my position. VZ in solid base. Maybe value investing will have a moment in the sun. Good Luck
Thanks for your encouraging words. The channel gained 2,000 subs in the last 30 days...so making some progress. If people were to spread the word about Armchair Income, it would be appreciated...as long as it's done with respect, of course! BMEZ looks interesting, I'll take a look, thanks.
As of today December 10th 2023
SPYI is up 3.86% (YTD) + 8.66% dividend = +12.52%
SPY is up 20.34% (YTD) + 1.43% dividend = +21.77%.
The 'face ripper' rally (like the one of the last 6 weeks) caused SPYI to underperform significantly, which makes it no good for volatile environment. 😢
That's correct. Covered call funds do worst when the market is ripping. That's why I don't put 100% of my assets into them. When the market is trading sideways, SPYI will outperform SPY. Most of the time, SPY will create the highest total return, but it doesn't send you cash each month to pay the bills...you have to know when to sell it at highs do something else when it's down (like 2022)...that's not ideal if you're retired.
@armchairincomechannel
I am retired, and what is ideal for me is to get in a trade that has the highest probability for profit, which I periodically take out. Being retired doesn't mean you need to get paid every month. I take profits only 3 or 4 times a year, but they are big enough to pay for everything (I prepay mortgage for months). 'Short vix', ZIVB is paying for my retirement rn. It's up 50% for only 8 months, which means I can withdraw 30% of the Net Liquidation Value of my position and have the same amount of money left invested in it like I had 8 months ago.
The more disciplined you are, the less frequent you need to receive distributions. Some people favor monthly payouts, I'm ok with quarterly or monthly. Sounds like you are ok with less frequent than that.
The cool part is that you don’t have to sell to receive income compared to the S&P 500 without any tax implications.
Yes, that’s appealing to income investors, especially retirees.
Is there any benefit having this in a ROTH?
It would lower your tax burden but SPYI already more tax efficient than most competitors because it distributes a high percentage of return of capital which is taxed as capital gain rather than income. A Roth is usually used for the least tax efficient investments.
Can you use this in an IRA or a ROTH IRA and not worry about taxes in your ROTH IRA
I'm not qualified to give tax advice but in general terms..a Roth IRA allows you to contribute after tax dollars and your earnings grow tax free, after which they can be withdrawn after age 59 1/2. Based on that explanation (sourced from Schwab) the answer is "yes".
@@armchairincomechannel thanks
What will spyi do if there is a major sell off and recovery on spy.
Will spyi get stuck on recovery due to covered call cap?
In short, I'll do nothing. We had a sharp sell off and recovery in August and there was no loss. If there selloff lasted longer than the option duration (approx 6 weeks), and the recovery was faster/greater than the out of the money rate for teh options then yes, SPYI would recover less than SPY. Every investment has risk.
@@armchairincomechannel I'm in the same shoes as you. 52 thinking of doing early retirement. trying to plan high paying div. to replace my income. I have invested in high paying div. etf.. its working so far.. hope it stays this way.. keep up the great work you do!
Great video .. might add some spyi to my portfolio.. small percentage for now
Thanks for your feedback, glad you found it useful :)
I am buying. Did you?
I’ll cover my updated opinion in a video soon but to answer your question…yes 👍🏼😀.
I wonder how these tax benefits translate if investing from Australia?
I can't speak for your Australian tax obligation, but for the US tax obligation it is beneficial because a large percentage of the distribution shifts from taxable income to non-taxable capital gain. That's assuming you file a tax return with the IRS. If you don't bother to file a return wtih the IRS, then you'll have dividend withholding deducted at the same rate for every income investment and no chance of a refund.
Amazing!!!
Thanks! Glad you enjoyed it.
Great video!
Thanks! Planning to do more interviews in 2024.
Soooo... is it qualified or ordinary🤔.... sounds like a good portion of it is qualified but is it still honestly tax-efficient.. right now I have DGRO & SCHD... and would love to add one more qualified etf to my profolio but I don't want to add something that's going to kill me in taxes😂... thanks for your time guys
We won't have an accurate breakdown of the tax treatment until the end of year tax statements are issued, but in broad terms, the majority is Return of Capital, which will lower the cost basis then be tax on sale as capital gains. The minority will be dividends from S&P 500 companies, which will be a combination of ordinary and qualified dividends. Thanks for watching.
Return of Capital is not a bad thing with covered calls. No taxes due.
It can be good or bad. No income tax due but your cost basis is lowered, and capital gains tax is due when you sell...if you sell.....There's no free lunch but its a better tax scenario for most people.
@@armchairincomechannel This is a common thing with covered call etfs. Works for me if the NAV doesn’t depreciate too much.
Rising nav and no tax on the roc. Woooo!
So far, so good :)
I am more interested in the money they really earned with their strategy on a monthly basis, rather than what they distribute.
In other words I want to see the pay out ratio. Taxes saved are payments out of the pockets of us taxpayers. Doesn´t say anything about their strategy or investment results. My 50c.
You raised an important question. I’ll address it in a future video. Most of their return comes from the distribution. If they distribute their assets then those distributions aren’t net returns. It’s an ETF so the NAV equals the price. The NAV has been flat, despite high, consistent distributions. In other words, it hasn’t eroded, which was my concern. It’s still a young fund but at this point it’s on track with its objective to produce income and keep up with SPY in total returns (or almost keep up).
@@armchairincomechannel Thank you for picking up my remarks. You are right total return is on track given the implied strategic limitation when the underlying is going up quickly, what happened this summer.
However, I would propose they increase transparency big time. They still do not give clear picture what part of their different tactical instruments , i.e. buying calls, selling calls etc. has contributed how much to the monthly result. In short, I am missing a monthly P&L statement by the instruments used. Why can´t they tell us what they do or did? What went good, what failed, and why? Compare it to the way better transparency of yieldmax.
Jepi head said they used ELNS so shareholders didnt have to refugure cap gains
Thanks for sharing.
If you want to lose your money remember nusi. The run that too. Lol.
Yes, that’s a whole other can of worms I’ll address at another time.
Beware!
SPYI only paid my first dividend- then they just stopped paying dividends.
I sold SPYI right away.
If you live outside the US: the US tax will take 30% of your dividend payments!
Recieving only the first dividend and then loosing 30% of the dividend to the US tax...no thank you!
If you didn't receive dividends, contact your broker and ask them to resolve. I've received my SPYI dividends, as has everybody in the Armchair Community. Regarding withholding tax at 30%, that's the default setting for every US stock and has nothing to do with SPYI. If you haven't already, check to see if your country has a tax treaty with the US and if that tax treaty entitles you to a lower rate of withholding. Many countries have rates as low as 15%. Lastly, the actual taxable amount you owe is almost certain to be far less than 30%, so if you file a tax return with the IRS, you are likely to receive a refund.
Thank you for your advice👍I will check that out.
You're welcome. Sorry to hear about the glitch and hope its resolved soon. If you haven't looked at Interactive Brokers, they're good for Non-US accounts and familiar the reduction of withholding taxes based on tax treaties.
If you're on the bubble in a tax bracket or staring at the barrel of paying part B Medicare. Getting that ROC helps.
Good point, thanks for watching :)
Excellent video
Thank you very much! Appreciate the feedback.