Income Engines

StateStreet has filed for the SPDR NASDAQ MyPaycheck ETF. It will be a fund of funds and while there is surprisingly little information on the underlying index for now, Copilot thinks it will target about a 6% yield. Great name, it overlaps one of the things we talk about here for bridge strategies and it reminds me of the StrategyShares NASDAQ 7Handle Index ETF (HNDL) which started trading in 2018 and targets a 7% distribution that can be comprised of yield, capital gains and return of capital.

It was a lot harder to cobble together 7% in 2018, I remember the fund having a lot more exposure to MLPs and funds like SDIV.

The chart is price only. Right now, the distributions are a shade under 7%. 

SDIV has been paying out closer to 9% with much more volatility and obviously compounding very negatively for anyone taking out the distributions. When I first wrote about HNDL, that URL doesn't exist anymore, I expressed concern that the fund would deplete which it clearly has not done. Thinking back to 2018, "the fund will yield 7% and the price will trade sideways" would have been thought to be very good result, I do think it is a good result. 

Lately, HNDL has been paying more ROC. One third of the fund is in various aggregate bond funds that yield more like in the fours, it might actually be more than 1/3 because another 28% appears to be in swaps that replicate the fund. 

I took a stab at making a paycheck strategy as follows;

BKLN and BSJS are in my ownership universe. 

If all the income is taken out then it would deplete after 27 years per Copilot. That seems a little too optimistic but as a bridge to some financial milestone it could last a decently long time. The withdrawals could be managed to avoid the negative compounding (take less out).

HNDL and our idea held up well this past March when the Iran war started but they both got hit hard during the Tariff Panic, dropping about 15%. 

Although not precise terminology, this idea plays off the concept of carry, creating an income "engine" from a portfolio balance that doesn't move around that much.

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