2024 Has Been Amazing for This High-Yield ETF

Dec. 30 , 2024

As I dig deeper and deeper into high-yield ETFs–and invest more and more of my money–I’m constantly reminded of one of my favorite quotes by Robert Pirsig:

“It’s a confusing thing. The truth knocks on the door and you say, ‘Go away, I’m looking for the truth,’ –and so it goes away. Puzzling.”

I was very skeptical at first of high-yield stocks and high-yield ETFs.

At the same time, I was absolutely done with drawdowns and obsessively interested in constant winning. I wanted something to put my money in that would incessantly pay out.

Never put your money in an asset that doesn’t pay you back.

That phrase from a multi-millionaire kept repeating in my head.

Only deal with assets that pay you back–and drawdowns and temporary paper profits don’t pay me back.

Meanwhile, high-yield was there, quietly standing in the corner.

Just waiting for me to open the door.

High-yield ETFs can pay me back.

And pay me back massively.

But are they dangerous? It depends.

A high-yield stock is definitely dangerous. It’s too high for a reason and is probably a desperate, last-gasp for a company to hold on. A 30% yield on an individual stock is probably going to end in tears.

But a high-yield ETF based on options trading? Totally different. Anyone can sell covered calls and make a little income. This can be done on almost any large cap stock.

All I have to do, if I’m really looking for the answer to my problem, is sell covered calls on stocks that pay out large premiums (note: volatile, in-the-news stocks pay massive premiums; it comes with the territory).

So, if I sell covered calls on a volatile instrument, I’m going to receive mind-bending premiums. And unless options trading disappears, this opportunity will be available indefinitely.

(As you know, options trading volume is currently at all-time highs, and rising.)

Is it time to stop telling the solution to go away?

Let’s take a look.

First, we’ll pick an ETF. I’ll pick CONY because I already own it in real life.

Second, we’ll do an ETF instead of selling covered calls ourselves. That’s too much work for my busy schedule.

If I did that, how would I have done in 2024?

If I decided to use CONY as an “investment” and reinvested all distributions instead of taking them out and using the cash flow, here’s how 2024 would’ve turned out:

Not taking any of those huge payments would’ve led to CONY absolutely destroying the market, 46% to 28%.

Just as a trade, CONY wins by a mile.

But what if I took the money?

If I took the money, here’s how much I would’ve received through November in 2024:

On a $10k investment, I would’ve been paid $6,500 so far (not including December’s payment). My initial investment is almost entirely paid off.

And once I’ve gotten my $10k back (which could be just a couple more months), I could switch to reinvestment and grow my principal back up. Or I could ride CONY for as many years as possible, getting about $600 per month after already getting my money back.

I could actually do a number of different things.

But do you know what’s nice?

Deciding what to do with money already in my pocket.

As opposed to deciding what to do with temporary paper profits or what to do with a long drawdown.

Remember what Nuke LaLoosh once said?

“Winning–it’s like better than losing!” (caution: one naughty word in there.)

If you’re interested in things like this, let me know.

If you’re interested in joining the Dividend Income Program, where we discuss many possible portfolios and you get the chance to email me questions, let me know that, too. You can join by sending $400 to scotwelsh@gmail.com via PayPal. I can also send you an invoice.

Hope you had a great holiday and Happy New Year!

Scott

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