Should I Invest in QYLD?

https://www.etf.com/QYLD#overview

One of the most popular ETFs that I see on social medial is the Global X Nasdaq 100 Covered Call ETF (QYLD). This ETF seems to have a lot of very enthusiastic investors. I can see why people love this fund with its high yield and monthly distributions, what is not to love? I have looked at this fund before to decide if I should invest in it. Previously, I have decided not to invest in this fund. With all of the hype around this fund I decided to take a look at it again to see what I may be missing.

First off, let’s start by taking a look at the fund and its objective. Below is an excerpt from the Global X website:

FUND SUMMARY

The Global X Nasdaq 100 Covered Call ETF (QYLD) follows a “covered call” or “buy-write” strategy, in which the Fund buys the stocks in the Nasdaq 100 Index and “writes” or “sells” corresponding call options on the same index.

FUND OBJECTIVE

The Global X Nasdaq 100 Covered Call ETF (QYLD) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the CBOE Nasdaq-100 BuyWrite V2 Index.”https://www.globalxetfs.com/funds/qyld/

Basically, the fund tracks the Nasdaq 100 and writes covered calls to provide the potential for high income. The fund offers monthly distributions. The distribution yield is greater than 10%. It is an actively managed fund with an expense ratio of 0.60%. While the expense ratio is a bit high, the high distribution yield more than makes up for it. So far this fund looks great.

Now let’s take a look at the fund has performed. First, let’s look how it compares to the total stock market. For this comparison I used Vanguard’s Total Stock Market ETF (VTI). The chart below shows that QYLD has significantly underperformed VTI since its inception. VTI had an average annual total return with dividends reinvested of 14.38% compared to 8.17% for QYLD.

-ETF Channel

Next we will look at how QYLD compares to the S&P 500. For this comparison we will use SPDR S&P 500 (SPY). Since inception, QYLD has underperformed SPY significantly. SPY had an average annual total return with dividends reinvested of 14.44% while QYLD returned 8.17%.

-ETF Channel

Since QYLD tracks the Nasdaq 100 let’s see how its returns compare to the Nasdaq 100 using the Invesco QQQ Trust (QQQ). QQQ crushed QYLD in average annual total return with dividends reinvested 21.89% to 8.17%.

-ETF Channel

Below are some charts comparing QYLD to a couple of popular dividend ETFs, the Vanguard High Dividend Yield ETF and the Schwab U.S. Dividend Equity ETF. You can take a look for yourself at the returns and see that QYLD underperformed both of these ETFs.

-ETF Channel

-ETF Channel

This was just some quick research on QYLD and not a true deep dive into the fund. Still, based on this research I will stand by my previous decision not to invest in QYLD. In my opinion, QYLD is not a fund for someone in the wealth building stage of their journey. QYLD looks like it is a fund that is more appropriate for someone who is in need of income and needs the dividends to cover living expenses. When I get close to retirement in a little less than 10 years from now I will look at QYLD again. It looks like a great fund to increase income in retirement but for now I will stick to funds that should provide with a much greater total return.

Here are some of the businesses that I use that I thought some of you might be interested in.

I use the free version on trackyourdividends.com. This is a quick an easy way for me to track my estimated annual income from dividends.

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Lolli has a variety of stores that it is affiliated with and offers rewards for shopping at these stores. I use Lolli when I shop on Chewy and I get bitcoin as a reward. If you are interested in Lolli and want to help support the blog here is my referral link: https://www.lolli.com/share/XP7gxDgqC4

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https://m1.finance/ktIiFeOI5zDr

I use M1 Finance for my taxable growth account. M1 Finance offers promotions for signing up. At the time of writing this post, the promotion is for $30. These promotions vary from time to time but is usually a $10 bonus. If you are interested M1 Finance and want to support the blog here is my referral link: https://m1.finance/ktIiFeOI5zDr

If you use the referral links listed above I could receive compensation. Please take the time to read the terms and conditions before signing up.

Published by Bill

I am just a blue collar factory worker trying to reach financial independence by spending less, earning more, saving and investing.

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