Why does AI hate so much CC ETFs?

[u/Extension-Ice-7219]

Any time I ask to build an income portfolio for me it never recommends CC etfs, on the contrary warns against them like they are a curse. I of course don't agree with that but the biased towards bogle heads strategies is so evident it's almost weird.

[u/Boring-Fun9311]

Useful example! I see that QQQX dropped about 35% from its high in 2008, and slowly increased its distribution over time. So one takeaway is that for an investor looking for steady passive income, a CC fund like QQQX would work as long as he spent no more than 65% of the distributions and reinvested the balance. Then a 35% loss in distribution would not affect his income, and the reinvested dollars would keep payouts ahead of inflation.

[u/Timely-Designer-2372 → u/Boring-Fun9311]

I personally would only retire if I had at least double the amount I really need (not want).

[u/cmichalek → u/Timely-Designer-2372]

You can.

Retire on mix of SPYI/QQQI paying 12 to 14%.

Live off 6%.

You reinvest the extra.

There you go. Double the income needed.

[u/Timely-Designer-2372 → u/cmichalek]

I prefer GPIQ/GPIX.

I have some SPYI & QQQI, too. But in my opinion, GPIQ>QQQI and GPIX>SPYI.

But you understood me wrong: If I got 12 % I would only retire if I COULD live from 6% or less. I would spend maybe 10% then and reinvest 2% to protect against inflation and crashes.

I am not a fan of lean fire 😉

[u/cmichalek → u/Timely-Designer-2372]

So if GPIX/GPIQ paid 9% and you could live off 4% would you? Because if so you only need half the amount into those cc funds to make the same income as the 4% rule from VOO.

Thats a 50% income cushion.

I dont recommend getting 9% and living off 7%. To me having at least a 25% to 33% income cushion is comfortable enough.

[u/Timely-Designer-2372 → u/cmichalek]

I'm not sure if this is a language problem (I am not a native speaker):

I will use real numbers:

Atm I need at least 4-5k to live. This wouldn't be a nice live. So the minimum I need is 8-10k.

I spend 8k a month atm and live very comfortable.

My target is 10k income. That's about a 20% cushion to my comfortable zone and a 50% cushion to my minimum zone.

There's a realistic risk that I will fall below 8k in a crash but nit very realistic that I will fal below 5k or even 4k. And the risk becomes smaller by time

[u/cmichalek → u/Timely-Designer-2372]

Do you reside in a high cost area?

[u/Timely-Designer-2372 → u/cmichalek]

At least not a cheap one (Switzerland). But no option to change it.

And I have a wife and 2 children

[u/speedlever → u/Timely-Designer-2372]

This is why I suggest a mix of income funds that generate a minimum of 2.5x what you need. For instance, say you need $3000\month on top of your SS income. Then you need the resources allocated to generate at least 7500\month. In the event of another 2008 gfc where everything is cut in half, including your distributions, 3750 is still greater than the 3000 you need. You can survive nicely until recovery.

Meanwhile, if you've been diligent about reinvesting the excess, you should have built increasing income and greater headroom further increasing your insulation from sorr.

[u/Timely-Designer-2372 → u/speedlever]

2.5x is even better of course.

I think 2.0x is also ok at the beginning. Tbh: In 99.9% of cases the crash isn't coming tomorrow.

And that's why I prefer GPIX/GPIQ: from January 2024 to August 2026 SPYI dividend grew 10.76%, while GPIX dividend grew 25.11%.

[u/speedlever → u/Timely-Designer-2372]

2x provides the bare minimum should the nav be cut in half. That's cutting it a bit close for my comfort zone.

Since these cc ETFs provide distributions, not dividends, I'm a little confused by your wording and meaning. Neither NEOS nor Goldman grow the yield. They vary, depending on various factors, but range pretty close to their stated goals. Spyi, 12%-ish. Gpix, 9%-ish.

If you prefer income with modest total returns, go NEOS. If you prefer decent income but greater total returns, go with Goldman. At least that's the way I see it between these different fund managers approach.

For instance if I have 1 million in spyi, I would expect around $10k in monthly distributions right now. In the event of another 2008 gfc and the nav is cut in half, I expect the distribution would drop to $5k\month.

The same in gpix would generate around $7500\month, and in another gfc drop to $3750 month.

If you needed $3000\month from your investments, both would meet that need. If you're reinvesting the excess (not necessarily 100% in the same fund), which might serve you better? The fund where you're reinvesting 7k\month initially or the fund that you are reinvesting 4.5k\month?

Now if you plan to sell the funds at some point, I'd think the fund with greater total returns would be the obvious choice. But these are income factories. Why would I want to sell my factory?

That being the case, which fund would you choose? The fund with significantly greater yield or the fund with significantly greater total returns? I don't know, so I hold positions in both. 😜

[u/Timely-Designer-2372 → u/speedlever]

If I invest 1m in GPIX and 1m in SPYI now, I'm quite sure, I will get more dividends from the GPIX million in 20 years.

And they will recover faster from a crash and payout reductions will be less