Investors seeking to enhance their income streams may find a compelling alternative to traditional bond portfolios through the NEOS Nasdaq-100 High Income ETF (NASDAQ: QQQI). This exchange-traded fund offers a remarkable yield of 13.85%, significantly higher than most fixed-income assets, making it an attractive option for those looking to increase their passive income.
High Yield and Strategic Management
QQQI stands out in the crowded investment landscape with an expense ratio of 0.68%. While this is slightly above the average for exchange-traded funds, the yield it provides more than compensates for the cost. The fund achieves its high returns by employing a strategy of selling covered calls on the Nasdaq 100, a collection of 100 of the largest non-financial companies listed on the Nasdaq Stock Market.
The fund’s managers utilize Section 1256 index options, allowing 60% of the distributions to be treated as long-term capital gains, which are taxed at more favorable rates compared to ordinary income. The remaining 40% is categorized as short-term capital gains. This tax structure, combined with active management that responds to daily fluctuations in the market, positions QQQI as a viable replacement for traditional bond portfolios.
Sector Allocation and Performance
Approximately half of QQQI’s holdings are allocated to the technology sector, reflecting the heavy weighting of tech stocks within the Nasdaq 100 Composite. The ETF primarily consists of large-cap stocks, with only 12% of its holdings being mid-cap companies. Notably, QQQI does not include small-cap stocks, which can introduce greater volatility into portfolios.
Over the past year, QQQI has appreciated by roughly 12%, including cash distributions, reinforcing its status as a strong performer in the current market environment. Although the covered call strategy limits potential upside, the ETF maintains exposure to the tech-heavy Nasdaq 100, which has consistently outperformed the S&P 500 over time. As the technology sector continues to innovate, QQQI investors may benefit from the widening gap between these two benchmarks.
Investors appreciate that QQQI provides monthly cash distributions, a distinct advantage over traditional bonds, which often offer interest payments annually or semi-annually. This monthly cash flow can be particularly appealing to long-term investors seeking regular income. With the bond market offering limited options for double-digit yields—often requiring investors to turn to higher-risk junk bonds—QQQI emerges as a simplified solution that enhances cash flow.
In addition to its investment offerings, SoFi now provides access to over 25 cryptocurrencies, including major assets like Bitcoin and Ethereum. This integration allows investors to manage their digital assets alongside traditional portfolios without the need for multiple apps or logins.
As investment strategies evolve, the NEOS Nasdaq-100 High Income ETF provides a modern approach to income generation, challenging traditional fixed-income investments and appealing to a broader range of investors looking to optimize their portfolios.
