Funds

Tax-Efficient Fund With 14% Yield Investor Owns for Goal of $2 Million


Austin Hankwitz, 27, is an investor and personal finance podcaster. In January 2023, he began an investing challenge to build a portfolio worth $2 million in eight years and do it publicly so his followers can track his progress and learn from him through his Substack blog.

His brokerage account mainly holds dividend and technology stocks and an S&P 500 index fund. He also has a self-employed or solo 401(k) that includes a Roth and an after-tax account where he holds major index funds. Altogether, he has accumulated about $164,000 in equities. He also holds bitcoin and ethereum. Including crypto, his investments now total $300,000, according to records of his accounts viewed by Business Insider.

Over the past year, he has researched different ways to diversify his portfolio. Since he is young, he has time to ride out volatility in the market. This means he can experiment with various, sometimes riskier, newer investments that could accelerate his returns. That explains his bet on bitcoin, which has brought him gains of over 217% over the last year. Ethereum has gained him 93%.

Beyond crypto, he has also tried other types of investments that don’t just trail major indexes, such as the VanEck Morningstar Wide Moat ETF (MOAT), which tracks a Morningstar basket of large and mid-cap US companies that are well-priced and have competitive advantages.

He also began buying the NEOS S&P 500 High Income ETF (SPYI), which launched in August 2022. This fund holds all the stocks within the S&P 500, or SPX, to capture the index’s returns and includes a strategy that trades call options on the index, allowing it to provide an annual distribution yield of 12.10%.

Hankwitz noted that it was a great way to generate steady income. It also beat out similar funds, such as the JP Morgan Equity Premium Income ETF and the Global X S&P 500 Covered Call ETF, throughout 2023.

The graph below compares all three funds’ performances for 2023.


This is a table of three options strategy ETFs that also track the S&P 500.

Portfolio Visualizer



For this reason, he decided to bet on an ETF similar to SPYI that went live in January 2024: the NEOS Nasdaq-100 High Income ETF (QQQI). Like SPYI, it’s an actively managed fund that gains exposure to Nasdaq 100 companies while trading call options on the NDX Index. This fund has an income distribution of 14.28% annually, compared to 12.01% for SPYI.

Similar ETFs include the Global X Nasdaq 100 Covered Call ETF (QYLD), which has a 12-month trailing yield of 12.31%, and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ), with a 12-month rolling yield of 9.87%.

Hankwitz likes the NEOS ETFs because they provide steady returns; in the event the S&P 500 or Nasdaq 100 pulls back, there could still be a yield from the options portion of the fund.

On the tax side, the QQQI utilizes tax loss harvesting, which means it uses losses to offset gains to maximize what is kept in profits. It’s also subject to the 60/40 tax rate, which means that only 40% of the fund’s gains are subject to the higher short-term capital gains tax rate.

So far, Austin has purchased over $3,000 of QQQI in his regular brokerage account. While buying this fund within a retirement account could further create tax advantages, he doesn’t want to wait until retirement to use the yields. He plans to continue buying more of QQQI, including by using gains from other investments to reinvest into this fund.



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