High-yield ETFs - why take risks?

kmiklas

kmiklas

A friend hit me with a tough argument to counter. I was preaching my love of the bond markets, and then opined that the top ETFs are superior: they pay a solid yield, are heavily diversified to minimize risk, and have minimal fees. They are superior to a passive fund (like NYSE:SPY) because there is a team actively managing the assets.

- For example, in 2022, (NYSE:JEPI) [2] paid out 11.8% last year. [1], while In 2022, the SnP lost 18%.
- This was a weird year for the SnP; perhaps a better measure is over five years paid 10.359% [5]
- In the bond market, the 10yT paid out around 3%. [4]

So..... why mess around with anything else? Just plunk your dollars into a high-yield ETF and let it earn. More recently I've been laddering the bond markets, pulling in around 6%, and I'm wondering, "Why am I wasting my time when I can make double that so easily?"

This would apply to all of us: all you technical traders, investors... unless the goal is to try and beat the Masters running these ETFs, and pull in 15% or more, what is the point?

Thoughts?
Thanks, Keith :^)
Non-professional - not licensed - not qualified to give advice - opinion only

1. https://www.yahoo.com/lifestyle/11-8-yielding-etf-pays-050155364.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAHd68UIh5h-21SSTglnaM5q92CSgDW8FCxJKWET9taiNKokpBLydTjnovaLGS2LQEwdHk_RzAcYlM79nvkabiwQJytrY9hR33qkN7F2MBd_fdI5Egzom2L8_ewHl68QWGHHlozXVqRHAKbHy-tO0798fh8XoVVENWHOXS6GbsN-5#:~:text=JEPI was one of the,$500 million in weekly inflows.

2. https://www.forbes.com/sites/stevev...2-should-retirees-be-worried/?sh=6f30d55c1ffc

3. https://am.jpmorgan.com/us/en/asset...quity-premium-income-etf-etf-shares-46641q332

4. https://ycharts.com/indicators/10_year_treasury_rate

5. https://tradethatswing.com/average-...ns-for-sp-500-5-year-up-to-150-year-averages/
 
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AND looks like in medium + longer time frames , SPY = better+ hard to beat.
And SPY is liquidity leader.
JAN down[2022] in SPY= 88% chance of bear market[Stock traders Almanac];
OCT maybe a bear killer , was in 2022.....................................................:caution::caution:
 
You like bonds in a rising rate environment? What are the real rates? And why do you think actively managed means anything?
Fixed income managers always measure against a benchmark or peers. If they are not doing well they change the benchmark. And even if they lose money they say we beat the benchmark. Fixed income has a captive audience as well
 
2rosy said:
You like bonds in a rising rate environment? What are the real rates? And why do you think actively managed means anything?
Fixed income managers always measure against a benchmark or peers. If they are not doing well they change the benchmark. And even if they lose money they say we beat the benchmark. Fixed income has a captive audience as well
More...
- I do like bonds now because methinks that the rates will level off and steepen, especially now that the debt ceiling was raised an the Treasury will be floating billions of dollars in new issues to refill their coffers.
- Real rate is irrelevant because inflation applies to all instruments
- I would think that actively managed is better, because we rely upon the wisdom and experience of our fund managers to take action when trouble looms.
- I'm using the SnP as a benchmark.
- What do you mean by, "Fixed Income has a captive audience?"
 
"JEPI may be tax-inefficient, as distributions from the fund may be taxed as income, and dividends from underlying stock holdings are not considered qualified because of the offsetting options positions. JEPI isn't eligible for Tax-Loss Harvesting, since we can't find a viable alternate fund."

Also I see:-

"The big difference between the two funds is that JEPI is focused on the S&P 500 index. While JEPQ is focused on the NASDAQ 100 index. One thing to remember is that although both of these funds offer attractive dividend yields right now, the high yields aren't likely to continue into the future."
 
2rosy said:
You like bonds in a rising rate environment? What are the real rates? And why do you think actively managed means anything?
Fixed income managers always measure against a benchmark or peers. If they are not doing well they change the benchmark. And even if they lose money they say we beat the benchmark. Fixed income has a captive audience as well
More...
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NO;
i dont even like them in hindsight , much past 50 years. Maybe good for Bloomberg salesman.
Sometimes it does; LOL mostly not much, except the bond managers surely will do a better job than many people:D:D
Bond slaves[captives] may be a compliment; but i would rather slave[work hard] for me + family. Funny how they never use a benchmark like SPY; so make one up againLOL
 
In theory JEPI is supposed to be a bond fund, but looking at the stock price versus some other bond ETF's, it certainly looks to have more equity-like performance. Not sure that that matters much, but it is worth keeping in mind if you are using it as a hedge against an uncertain market.
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