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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4 comments:
I've been playing around with the notion of a specific portfolio that targets monthly paychecks (mainly ROC), no erosion, while delivering a reasonable price return (various combos of OVL, GPIX, GPIQ, SPYI, QQQI, BOXX) however have not yet reached the right level of volatility/return. I don't recall if you had posted such as analysis?
Clients own BOXX which obviously has very low volatility with no distribution.
The others you cited have high distributions but give no break in terms of volatility. In terms of path dependency, net of their distributions they've had positive growth rates because the indexes have done so well.
If there is a bear market of normal duration even if not catastrophic then these funds would go down a lot.
If I were pursuing this IRL, I would allocate less to crazy high yielders than I did for this blog post. Maybe a little to them but the blend for this post has 25% betweeen MSFO an NFLY which is a lot IMO.
I included WTPI for this post which is similar to your choices in that I would expect it to participate in a decline but the weight for that type of fund isn't very large.
Hi Roger, thank you for drawing attention to the new ETF listing from State Street. I have owned HNDL since 2018 and absolutely love it, but as a chronic seeker of diversification I like to know what other fund sponsors might offer. Trouble is, there are very few funds like HNDL. In fact, the only thing that currently come close is the open-end mutual fund SWJRX by Schwab, but it pays out only 5% of NAV annualized instead of HNDL's 7%. (A while back there was another copy cat called MPAY, also dishing out 7%, but it liquidated for lack of interest.)
For me, a fund with substantial ROC is a plus because the ROC shows up as a non-taxable "nondividend distribution" on my 1099. For 2025, about 50% of HNDL's distros counted as ROC, so I only got taxed on half the income.
BTW, I did a back-of-the-napkin calculation the other day for total cash flow produced by a 1 million dollar investment in HNDL since inception assuming 1K per month re-investment. I came up with roughly 560K total income produced and the portfolio would still be worth roughly 1 million (the 1k per month re-investment is crucial for this outcome). YMMV but I think I could sleep well with those numbers. . .
--Bird
Great anecdote Bird, thank you. Intuitively, your math makes sense, impressive to be happy with getting what you need versus succumbing to FOMO. I didn't mention in my post but for an ETF that no one talks about, HNDL has a sneaky high AUM.
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