Marcos Milla
Former Analyst at the Federal Reserve, ETF/Stock Newsletter Author
OVL can be one of the best monthly dividend ETFs of all time because it pays double-digit income without capping S&P 500 upside. It holds VOO as its core and earns income from defined-risk put spreads on the index rather than covered calls; its yield rose from about 3.5% to over 10% as it began paying out more option premium. Since January 2020 it returned 196% versus VOO's 178%. It shines in bull and flat markets but adds complexity and can underperform in severe crashes. x.com x.comÂ
The Vanguard S&P 500 ETF works as a foundation that doesn't depend on getting every stock pick right. It gives exposure to about 500 large US companies for a 0.03% annual expense ratio, roughly $3 a year per $10,000 invested. The plan is to keep adding to it over time and build individual stocks around it. x.comÂ
The S&P 500 fund VOO beats covered-call income ETFs like GPIX and QQQI because covered calls cap upside, leaving long-run returns worse. Since GPIX's October 2023 inception, VOO has compounded 26.4% a year versus GPIX's 23.6%, while QQQ's 25.4% beat QQQI's 21%. Fees add drag of about 1.1% for GPIX and 2.2% for QQQI versus 0.1% for VOO, and large monthly payouts are tax-inefficient. x.com x.comÂ
US index funds like the S&P 500 offer worse return per unit of volatility than momentum stocks. The index's low volatility lets investors use leverage, but in crises its black-swan swings get large, making risk control very hard for retail investors who lever up. With beta on both sides, there is little reason to hold the index; buying it without risk management returns far less than momentum stocks. x.comÂ
The NEOS S&P 500 High Income ETF suits investors who want cash income over capital appreciation. $400,000 in it could generate about $4,200 a month in distributions, versus about $347 a month from the Vanguard S&P 500 ETF. Both may deliver a similar total return of around 12%, one through more income and the other through more price appreciation. Critics such as @Budgetdog_ note the payout comes from a covered-call strategy that caps upside and may partly return capital. x.com x.comÂ
Buying the S&P 500 and forgetting about it for 30 years beats 95% of hedge funds. Average results are the winning strategy, yet almost nobody can sit still long enough to execute it. x.comÂ
Buying an S&P 500 index fund at 26 is an incredible strategy for reaching future financial freedom, because of the time value of money over a long horizon. Allocating capital to individual stocks is fine, but the index fund should not be forgotten. x.comÂ
Most retail investors who hold concentrated portfolios underperform a diversified benchmark like VOO. Depending on the study, typically 70-85% or more of those holding 10 or fewer stocks trail it most of the time, because of behavioral biases, higher volatility and missing the skewed winners that drive market returns. x.comÂ
Extreme fear has historically offered strong long-term S&P 500 buying opportunities. After VIX spikes above 30, 35 and 40, average 12-month S&P 500 returns were 23%, 28% and over 30%, respectively; after spikes above 40, returns were positive more than 90% of the time. x.comÂ
Equity volatility looks too cheap with the VIX in the 15s despite alarming oil and diesel headlines, such as the Saudis reportedly telling European refiners they will get no crude next month, per @zerohedge. That makes it a good time to buy volatility for October, with a spike still expected ahead of the midterms and peak tax-loss harvesting season. This is a very risky trade. x.com x.comÂ
Putting everything into the Vanguard S&P 500 ETF is hard to go wrong with, because most retail investors lose money trading individual stocks. That is the reply to a 36-year-old weighing liquidating everything into it and moving on with life. x.comÂ
