FULL DISCLOSURE:
I am not a financial advisor. This post is to provide information and not provide financial product advice. I discuss why I personally chose to invest in a stock, ETF, REIT, investment fund or cryptocurrency (which I have held for over a week) and also share information that is public about the following stock, ETF, REIT, investment fund or cryptocurrency and they are based on my own personal opinion.
I will not blog about any positions of stocks, ETFs or REITS and cryptocurrency which were initiated just within the last 72 hours of posting this blog article.
It is recommended that you should always consider visiting a financial advisor for independent financial advice before making investment decisions.
I do not work in the financial industry, so just because I write about it, doesn’t mean you should own it. So, consult with a financial advisor and do your due diligence, RESEARCH!
I am not receiving compensation by the company for this blog post.
I have no working relationship with any company whose stock, ETF, REIT or cryptocurrency mentioned in this blog post. Nor do I have a family member or friend who works with the company.
When it comes to ETFs, I noticed that on YouTube, Facebook, there are those who invest in GLOBAL X’s NASDAQ 100 Covered Call ETF (NASDAQ: QYLD).
First, I want to talk about this ETF but I do want to say that I do have it on my portfolio but it’s one of those that you need to know the positives and negatives and definitely do your due diligence, research this ETF and discuss it with a financial advisor, so you know if it’s worth investing in or not.
So, let’s first discuss GLOBAL X, this is a New York-based provider of exchange-traded funds established back in 2008.
They have $30 billion in managed assets, across more than 80 different products. And were an early proponent of thematic investing (a manager will select what’s important and by gathering a collection of companies involved in certain areas that you predict will generate above-market returns over the long term)..
The company was acquired by South Korea-based Mirae Asset Global Investments in July 2018 for $488 million. The company is quite successful under founder Park Hyeon-Joo and has been around since 1997 and have been acquiring companies in South Korea, Canada, Australia and the latest in the US with GLOBAL X.
So, I’m going to write about the GLOBAL X NASDAQ 100 Covered Call ETF (NASDAQ: QYLD).
The NASDAQ-100 was launched on January 1985 by Nasdaq. The NASDAQ-100 consists of Industrial, Telecommunication, Biotechnology, Health Care, Transportation, Media and Service Companies traded on the NASDAQ market. While the NASDAQ Financial-100 consists of banking companies, insurance firms, brokerage firms and mortgage loan companies.
The NASDAQ stands for the National Association of Securities Dealers Automated Quotients Exchange and refers to an index. It is the largest electronic stock exchange in the world by Market capitalization after the New York Stock Exchange (NYSE) in the U.S.
With that being said, the ETF has a gross expense ratio of .66%, a portfolio turnover of 28% and total holdings is 104, which 11.11% is Apple, 9.72% is Microsoft, 8.60% is Amazon, 3.99% is Alphabet (Google), 3.94% in Facebook, 3.79% in Tesla, 2.81% in Nvidia, 2.32 in Paypal, 2.13% in Comcast.
What people like about QYLD is the fact that it pays a monthly dividend of .23. From November 16, 2020 to May 15, 2021, a total of six dividends were paid for a total of $1.37 and what people like about it is the price which is currently at $22.20 and its current distribution yield is at 11.73%.
So the ETF does cover quite a bit in the sectors of information technology and consumer discretionary. And the strategy of the fund is:
The investment seeks to provide investment results that closely correspond, before fees and expenses, generally to the price and yield performance of the CBOE NASDAQ-100® BuyWrite V2 Index (the “underlying index”). The fund will invest at least 80% of its total assets in the securities of the underlying index. The CBOE NASDAQ-100® BuyWrite Index is a benchmark index that measures the performance of a theoretical portfolio that holds a portfolio of the stocks included in the NASDAQ-100® Index, and “writes” (or sells) a succession of one-month at-the-money NASDAQ-100® Index covered call options. It is non-diversified.
Morningstar overall rating is four stars. But Market Edge has it as a 2, their Second Opinion Weekly gives it an “AVOID”.
Typically when an ETF has a very high yield, especially at 11.73% it’s usually a red flag, but with that being said, this is where you do your research and you see that this ETF has paid its dividends without missing a beat. In fact, their dividends have increased, even during the pandemic.
Now, this ETF is based on covered calls, which is they sell options contracts to generate income. The income is passed onto shareholders via dividends.
QYLD is an ETF which acts as a variant to fix income and it responds best during the times of high volatility in the market.
One thing that I had to research was if the taxable income was using Ordinary Dividend or Qualified Dividend. And the other is what happens if you sell this ETF.
Ordinary Dividends are taxable as ordinary income, while qualified dividends are taxed at lower capital gain rates. They payer of the dividend is required to correctly identify each type and amount of dividend for your Form 1099-DIV.
I look at Qualified Dividend as GOOD! and Ordinary Dividends as NOT SO GOOD! And what happens if you plan to sell it. And let’s say, I was quite surprised.
So, you need to know this going into this ETF. Yes, it pays a consistent dividend monthly. It has a very high yield but if you intend to sell it, you have to make sure you sell it in the right moment and knowing that possibly a few hundred will go to Uncle Sam in long term capital gains.
So, if you intend to own shares of QYLD and sell it, then please do your research and know the risks involved. Watch these videos to know the positives and the negatives of QYLD:
So, I know a lot of people want to earn passive income through high dividend stocks, ETFs and REITs and for me, I love passive income.
But at the same time, before investing, due your due diligence, research, talk to a financial advisor and know the risks and what happens if you decide to sell short term vs. long term of QYLD. There are risks, but moreso for those who intend to sell.
As for me, I went into QYLD for the dividends and high yield (strictly, for passive income), to grow my holdings with an intention of not wanting to sell it… EVER.
