I got a comment this week that I see all the time. And I don’t think the person was being confrontational — they were genuinely asking a good question.

“If there’s a downturn in the market, and everything falls, what happens to your dividend income?”

It’s a fair ask. And the answer is actually the opposite of what most people think. In a downturn, income doesn’t disappear. In fact, sometimes it increases. But here’s the thing — most people don’t understand why because they don’t know how these ETFs actually generate income in the first place.

So let me break that down. No jargon. No complicated finance-speak. Just how it actually works.

The Real Problem: Nobody Explains How These Work

If you’re asking this question, you’re not uninformed — you’re actually thinking clearly. The problem isn’t you — it’s that nobody’s explained how these income ETFs work.

Most people think income comes from company profits. Dividends, right? Company makes money, shareholders get paid. That logic is solid. But here’s where it breaks down.

The ETFs I own — QQQI, SPYI, CHPY — they don’t primarily generate income from dividends. They generate income from options premiums. And that’s a completely different animal.

When you own an income ETF like JEPI, you’re receiving distributions. Regular, monthly payments. But those distributions aren’t coming from Apple or Microsoft or any company in the S&P 500 paying dividends.

They’re coming from premiums. Options premiums.

Think of a premium like this: it’s the price someone pays you for the right to do something in the future. You’re collecting that price upfront. That’s your income.

Covered Calls: How Premiums Actually Get Generated

Here’s how this works in practice.

Imagine you own 100 shares of Apple. You paid $150 a share. Apple’s trading at $155. You own it outright.

Now someone comes to you and says: “I’ll pay you $2 per share if you agree that I can buy your shares from you at $160 anytime in the next month.”

You’re collecting $200 upfront for that promise. That $200 is the premium. It’s income. It comes into your account. And you didn’t have to sell anything.

If Apple stays below $160 by the end of the month, the other person walks away. Their option expires worthless. You keep your shares and you keep the $200 premium. Then you do it again next month.

That’s a covered call. You own the shares (covered), you sell someone the right to call them away from you (call), and you pocket the premium.

This is how JEPI works at scale. JPMorgan owns hundreds of millions in S&P 500 stocks. Every month, they sell call options on those holdings. They collect premiums. That premium is your distribution. Your income.

Puts: Collecting Premium on the Other Side

But here’s where it gets interesting. Some of these income ETFs don’t just sell calls. They also sell puts.

A put is the opposite side of the trade. You’re selling someone the right to sell you shares at a certain price. You’re collecting a premium for agreeing to that risk.

Think of it this way: if you sell a put on Apple at $150, you’re saying “I’ll buy your shares from you at $150 if they fall below that.” In exchange, someone pays you a premium upfront for that insurance.

Some funds — like REX Shares — layer in put spreads along with call spreads. They’re collecting premiums on both sides. The mechanics are slightly different, but the principle is the same: they’re getting paid for taking on risk. And that payment is income.

The benefit? Puts can help hedge downside. You’re not just collecting income — you’re also getting some protection built in. That’s why some of these strategies are more defensive. They’re generating income and managing risk.

Why Premiums Exist: The Key Insight

Now here’s the critical part. Premiums exist because of uncertainty. Not because a company is healthy or sick.

When you sell someone the right to buy Apple at $160, they’re paying you for the possibility that Apple could jump above $160. They’re buying protection. They’re buying the upside if it happens.

The higher the uncertainty, the higher the premium. Someone will pay more money for that right when the market is chaotic, volatile, and unpredictable.

In a calm market? Premiums are small. People aren’t worried, so options aren’t valuable.

In a volatile market? Premiums spike. People are nervous, they want protection, they want opportunity. They’ll pay more.

Here’s the thing nobody tells you: downturns are volatility events. And volatility is where premiums come from.

This is the game-changer. This is why income doesn’t disappear when markets fall.

2022: The Real-World Proof

Let me show you what actually happened.

In 2022, the market had a brutal downturn. The S&P fell 18% for the year. The Nasdaq fell even harder — down in the mid-20s. Terrible year for buy-and-hold investors.

But here’s what happened to JEPI. Yes, the share price fell. Of course it did — it owns S&P 500 stocks. Starting the year at $60.99, by September 2022 it was down to $51.23. That’s a 16% hit. Real money on paper. Painful to watch.

But you know what else happened? Distributions kept getting paid. Every single month. Because traders were still trading. Options were still being written. Volatility was through the roof. Premiums were huge.

Look at the actual distribution amounts:

The Calm Months (Feb-Jun 2022): $0.38 to $0.46 per share per month.

The Volatility Spike Months (Jul-Dec 2022):

• July: $0.62

• September: $0.56

• October: $0.48

• November: $0.61

• December: $0.61

The volatility was the thing generating the income. As the S&P fell, premiums got more valuable, not less. The fear was creating the opportunity.

A growth investor in 2022 was in a bind. Stock prices fell. If they needed income, they’d have to sell at the bottom — which is the worst possible time to sell. They’re forced to sell low.

An income investor with JEPI? Didn’t sell a single share. Collected distributions every month. Watched the volatility spike. Watched the premiums spike. Watched the income flow in. It’s not the same as being up for the year. But structurally, I’m not in crisis.

That’s the real difference.

How Fund Managers Pull This Off

You might be wondering: why don’t I just do this myself?

I tried writing my own call options. Once. It was tedious, time-consuming, and the math didn’t pencil out. I’d have to monitor positions constantly, roll them, manage expirations, handle edge cases. For the amount of money it would make me, it wasn’t worth the hours.

Fund managers have scale. They own hundreds of millions of dollars in holdings. They can write thousands of contracts. They can automate the rolling process. They can afford to do this efficiently because they’re doing it for millions of dollars, not thousands.

When you buy JEPI, you’re essentially hiring JPMorgan to do that work. You pay them a small fee (baked into the expense ratio), and they handle the whole operation. They collect premiums, they roll contracts, they distribute the income.

I just... receive it. Every month. It hits my account.

That’s the trade-off. Less control, more convenience. And for me, it’s the right choice.

The Key Question: What Happens to My Share Price?

Okay, so yes. In a downturn, my share price in JEPI falls because it owns S&P 500 stocks, and the S&P falls. My shares are worth less on paper.

Look at the actual numbers. In January 2022, JEPI closed at $60.99. By September 2022 — the worst month of the downturn — it was down to $51.23. That’s a 16% decline. By February 2023, it was sitting at $53.79. So roughly a 12% decline over about 13 months.

Is that painful to look at? Yeah. But here’s what didn’t happen during that time: I didn’t have to sell a single share. I didn’t watch my income disappear. I didn’t panic-sell at the bottom.

For comparison, the S&P 500 itself fell 18% in 2022. JEPI’s price declined less than that. But more importantly — I was collecting monthly distributions the entire time. Real money hitting my account. Every single month.

Compare that to someone who owns SPY (the regular S&P ETF, no options overlay). In 2022, they’re down 18%. If they need to live off their portfolio, they’re forced to sell. They’re selling at the bottom. They’re locking in losses.

Me? I’m not selling. I’m living off the distributions. The distributions might be smaller because volatility eventually calms down and premiums compress. But I’m not forced to do anything. I can wait. I can let it recover.

That’s the structural difference for me. It’s not that my income is immune to downturns. It’s that I don’t have to sell in downturns.

This is why income investing is structurally different from growth investing. One forces you into decisions. The other lets you stay disciplined.

Why This Still Works (And Will Keep Working)

The last piece: why does this work at all?

Because markets are always volatile. Always. Even in the longest bull markets, there are corrections, there are days of fear, there are earnings surprises.

As long as there are traders and investors, there will be hedging. As long as there’s hedging, there will be demand for options. As long as there’s demand, premiums will exist.

I don’t need a bull market for this strategy to work. I need trading. And trading is going to happen whether stocks are up or down.

That’s it. That’s the insight.

The Bigger Picture

If you’re asking “what happens to my income in a downturn?” — you’re asking the right question. But the answer depends entirely on how your income is generated.

If you’re relying on company dividends, yes, a downturn can hurt. If you’re relying on options premiums and volatility, a downturn can actually improve your opportunity.

That’s not magic. That’s not luck. That’s understanding the structural difference between dividend investing and options income investing.

I cover this in much more depth in the video version of this article, where you can see the actual 2022 data visualized. But the core principle is this: every dollar has a job. Some dollars buy you food. Some buy you shelter. But the dollars hired to generate income have a very different job than most people think.

Your Move

If you want to understand your income strategy better — or build one from scratch — that’s what this community is about.

I share my full portfolio breakdown, real numbers, wins and losses, and walk through the frameworks I use to think about income investing. There’s no “one right way,” but there are principles that work regardless of the market environment.

The Freedom Calculator (free to all subscribers) helps you figure out your actual freedom number — how much passive income you need to stop trading time for money. It’s worth running through, whether you’re just starting or you’ve been at this for years.

Join the community at my Substack, and let’s talk strategy together.

Disclaimer: I’m not a financial advisor. Everything here is based on my personal research and experience. Always do your own research and consult with a professional before making investment decisions.

Ready to go deeper?

Use the Freedom Calculator to figure out your number.

Join the community to talk strategy with other income investors.

In 2009, I filed for bankruptcy.

I owed more than I could count. I lost my home. I was paying over $900 a month — for five years — just to dig out of a hole I dug with my own hands.

Today, I’m collecting over $16,000 a month in passive income. I retired on my own terms in 2023 after 20+ years as a creative tech executive at companies like Netflix, Zappos, and Outschool. I’m building an income portfolio that pays me whether I wake up at 6 AM or noon.

So how do you go from bankruptcy court to that?

That’s what this article is about. Not the ETFs. Not the tickers. The real story underneath all of it — and the lessons that made everything else possible.

Quick Disclaimer

I’m not a financial advisor. I’m just a guy sharing his real story and what I’ve personally learned along the way. This is education, not advice. Always do your own research before putting your hard-earned money into anything.

2006 Rico

Let me take you back.

It’s 2006. I’m working at Zappos. Good job. Steady paycheck. And I’m feeling confident. Maybe too confident.

I wanted to buy a house. The problem? I didn’t really have the money for a down payment. But back then, the lending environment made it easy to pretend you did. Predatory lending was everywhere — and I walked right into it.

I did what’s called an 80/20 loan structure. One loan for the primary mortgage. A second loan to cover the down payment. Two loans. Zero equity. One hundred percent leverage.

And I didn’t stop there.

At the same time, I started a brick-and-mortar business with a partner. Retail. Right before the Great Recession — though obviously I didn’t know that yet. Nobody puts “economic collapse” on their business plan.

To fund that business, I took out a HELOC — a home equity line of credit — on a house I already couldn’t really afford.

Let me add that up:

• Primary mortgage — loan number one.

• Down payment loan — loan number two.

• HELOC to fund a business — loan number three.

• Credit card debt from the business — over $70,000.

I was over-leveraged. I was more optimistic than realistic. And I was using debt as a backstop instead of a tool.

That’s a big distinction. And it took me years and a lot of pain to understand it.

The Fall

Then 2008 happened.

The recession hit. The business didn’t make it. We closed the doors. The housing market collapsed. And suddenly I was sitting on a pile of debt with no way to service it.

My business partner was able to file Chapter 7 — a full liquidation. She had no assets, so the court essentially wiped the slate clean for her. But here’s the thing — I had co-signed on those business loans. Her slate was clean. Mine wasn’t.

I was still working full-time. I still had income. So Chapter 7 wasn’t an option for me. I had to file Chapter 13 — which is a structured repayment plan.

What does that mean in real life?

It means a court tells you how much you owe, how much you’re paying, and for how long. Every month. No exceptions. My payment was over $900 a month. For five years. And here’s the part people don’t realize about Chapter 13 — the more you make, the more your payments go up. There’s no reward for earning more. The court adjusts.

By the time it was all over — January 2015 — I’d paid back roughly $80,000. Five and a half years of my life under court supervision. Every dollar accounted for. Every raise monitored.

I’ll be honest — that period humbled me in ways I’m still processing. But it also taught me things no book, no YouTube video, no course could’ve taught me.

What I’d Tell That Version of Me

If I could sit across from 2009 Rico and talk to him, here’s what I’d say.

On Debt

2009 Rico thought debt was how you got ahead. Borrow to buy. Borrow to build. Borrow to bridge the gap.

2026 Rico knows debt is a tool — and like any tool, it can build you up or tear you apart depending on how you use it.

The difference? I understand leverage now. Real leverage. Not the kind where you stack loans on top of loans and hope the market cooperates. The kind where every dollar you deploy has a job — and that job is to generate income.

Every dollar has a job. That phrase means something completely different to me now than it would have in 2006.

On Risk

2009 Rico confused optimism with a plan. I was excited about the business. Excited about the house. Excited about the future. But excitement isn’t a strategy.

2026 Rico manages risk with structure. I have a 3-Bucket System. I have stop losses. I have exit strategies. I know what I’m willing to lose before I enter a position — not after.

From my experience, the moment you say “it’ll probably be fine” is the moment you need a plan the most.

On Co-Signing

Here’s a lesson I paid $80,000 to learn.

When you co-sign debt, you’re not supporting someone else’s dream. You’re taking on 100% of the liability with 0% of the control.

My business partner walked away clean. I spent five years paying it back. That’s not a complaint — it’s a fact. And it’s a fact I want you to hear if you’re ever in a position where someone asks you to co-sign.

On Starting Over

Maybe the biggest one.

2009 Rico felt like a failure. Like the bankruptcy defined him.

2026 Rico knows it was the foundation. Not the failure — the foundation. Everything I’ve built since then — the discipline, the systems, the portfolio — started in that five-year window where I had no choice but to learn.

You don’t build an income snowball without understanding what it feels like to watch money disappear. That’s not something I read in a book. That’s something I lived.

The Rebuild

My Chapter 13 was discharged in January 2015. I have the court document to prove it.

But “done” didn’t mean “fixed.” My credit was wrecked. My confidence with money was shaky. And I had to completely rebuild my relationship with debt and leverage from scratch.

By 2017, I’d gotten my credit score back to a decent place. And this time, I came at it differently. I wasn’t guessing anymore. I understood the difference between debt that drowns you and leverage that builds you.

I started investing in real estate with a partner. We built that portfolio up to over 30 units. Real leverage this time — income-producing assets with cash flow, not speculative bets with borrowed money.

Then COVID rolled around. We started selling properties for profit. And I rolled those proceeds into what you see today — my income portfolio. The income snowball.

I still have 4 rental units. I have a rollover 401k. A Roth IRA. My income portfolio. Even a fun account where I hold Rivian because you’ve gotta have a little fun with it.

But the core of everything — the engine that lets me live on passive income — started with lessons I paid $80,000 to learn in a bankruptcy courtroom.

There’s a much deeper story here about the real estate journey and the specific decisions that took me from discharged debtor to retired at my own choosing. If you want to hear it, reply to this article or drop a comment — I’ll write that one next.

Why I’m Sharing This

I share my portfolio numbers every month on this channel. I show the wins. I show the losses. I show the ETFs, the yields, the distributions.

But none of that means anything without context. And this is the context.

The income snowball I’m building right now exists because of what I lost in 2009. The systems I use exist because I once had no system at all. The discipline exists because I once had none.

If you’re starting from zero — or from below zero — I want you to know that’s not the end of your story. It might be the most important chapter in it.

If you want to see this story come to life, I recorded a full video version on my YouTube channel. [Link to video]

And if you’re working on building your own income snowball, my Freedom Calculator is completely free. It can help you figure out your freedom number and your timeline to get there. You’ll find it right here on Substack.

— Rico

There’s an entire category of ETFs out there — funds paying 10, 15, even 30-plus percent annually in distributions — and your financial advisor probably hasn’t mentioned a single one of them.

Not because they’re scams. Not because they don’t work.

Because the system your advisor operates in wasn’t built for them.

I want to walk you through the three structural reasons why. And once you see it, you can’t unsee it.

Quick disclaimer before we get into it: I’m not a financial advisor. I’m not bashing anyone’s profession. I’m a former creative tech executive who retired in 2023, and this is just what I’ve observed, researched, and personally done in my own portfolio. Always do your own research before putting your hard-earned money into anything.

1. Follow the Money

Let’s start with the uncomfortable one.

How do most financial advisors get paid?

The old-school model was commissions — you buy a mutual fund, your advisor gets a cut upfront. That model still exists, but it’s not the dominant one anymore. Today, the most common model is AUM — Assets Under Management. Your advisor charges a percentage of your total portfolio value. Industry average is roughly one percent per year.

So if you hand an advisor a million dollars, they’re earning about ten thousand a year to manage it.

Now here’s where it gets interesting.

If that advisor puts your million into a broad market growth fund and it grows to two million over a decade — their fee doubles. Ten thousand becomes twenty thousand. Their business grows as your portfolio grows. Everybody’s happy.

But what if they put that same million into an income ETF yielding ten percent? You’re pulling out a hundred thousand a year in distributions to live on. The portfolio value stays flat. Maybe it even drifts lower depending on NAV erosion.

The advisor’s fee? Stays flat. Or shrinks.

I want to be clear — I’m not saying advisors are greedy. Most advisors genuinely want to help their clients. But incentives are real. And when the business model rewards growth over income, growth is what gets recommended.

It’s not a conspiracy. It’s just math.

2. The Gatekeepers

This one surprised me the most when I started digging into it.

You and I — retail investors — can log into Fidelity, Schwab, Robinhood, whatever platform we use, and buy a brand new ETF five minutes after it launches. No approval needed. No committee meeting. Just click and buy.

Financial advisors at major firms can’t do that.

If you’re an advisor at a Morgan Stanley, a Merrill Lynch, a UBS — or even a large RIA — there are centralized research teams and compliance departments that have to vet every single fund before it gets added to their approved list. And the bar is high. Many institutional platforms require a fund to have at least a three-year track record. Some want to see hundreds of millions in assets under management before they’ll even review it.

Think about what that means.

Some of the most innovative income ETFs on the market right now — funds using covered call strategies, options overlays, 1256 contracts for tax efficiency — many of them are less than three years old. Some launched in the last twelve to eighteen months.

So even if an advisor wanted to recommend these funds — even if they personally owned them in their own brokerage account — they might not be allowed to buy them for clients yet.

The advisory world moves like an ocean liner. Retail investors move like speedboats.

That’s not a criticism. It’s just how the system works. Compliance exists for good reasons. But the side effect is a massive time lag between innovation and adoption.

3. Career Risk

This might be the most human reason of all.

There’s an old saying on Wall Street — “Nobody ever got fired for buying the S&P 500.”

If an advisor puts a client into a Vanguard growth fund and the market drops twenty percent, the advisor can point to the screen and say, “The whole market is down. This is normal. Let’s stay the course.” And the client nods. Because they’ve heard of Vanguard. They’ve heard of the S&P 500. It feels familiar.

But what if that same advisor puts a client into a leveraged options-based income ETF — something using weekly covered calls on semiconductor stocks — and it underperforms during a massive bull run? Or the NAV erodes faster than expected?

That conversation goes very differently.

The client doesn’t say, “Let’s stay the course.” The client says, “What did you put me in? I’ve never heard of this. Why wasn’t I in the S&P?”

And in the worst case? That client files a complaint. Or leaves. Or both.

There’s real career risk for advisors who recommend newer, more complex strategies — even when those strategies are sound. Even when the math works. The reputational downside of being wrong with something unfamiliar is way bigger than the upside of being right.

I get it. I understand it. But as someone who’s personally building my income from these exact funds, I think it’s important for you to know that this dynamic exists.

So What Does This Mean for You?

I’m not saying fire your financial advisor. If you have a good advisor who understands your goals, who listens to you, who’s transparent about how they get paid — that’s valuable. Keep that relationship.

But here’s what I am saying.

Your financial education is your responsibility. Not your advisor’s. Not your broker’s. Not mine. Yours.

There’s an entire world of income-generating ETFs out there. Funds paying weekly and monthly distributions. Funds using covered call strategies, options overlays, tax-efficient structures. Funds designed to pay you now — not thirty years from now.

I’ve been building my income snowball with these exact tools. I share every position, every distribution, every mistake in real time. I’m not saying these funds are perfect. I’ve taken losses. I’ve had to cut positions. I’ve learned expensive lessons.

But I’ve also built a portfolio generating over eighteen thousand dollars a month in passive income.

And I didn’t learn about any of this from a financial advisor. I learned it from doing the research myself, from other investors sharing their journeys, and from being willing to take messy action.

Every dollar has a job. And sometimes the most important job is making sure you know what tools are available to you — even if the professionals in the room haven’t caught up yet.

Your Next Step

If you want to figure out your own freedom number — how much passive income you’d need to cover your lifestyle — I built a freedom calculator that’s completely free. It walks you through the math so you can see what’s possible for your situation. You can find it right here on my Substack.

And if you want to go deeper — see my full portfolio, talk strategy, and connect with other income-focused investors — that’s what this community is for.

If it doesn’t challenge you, it doesn’t change you. Messy action is better than no action.

— Rico

I gave an honest 1-month update. Mixed results. Some green, some red. All paying income.

Now it’s time for the next chapter — because the portfolio looks very different.

I exited three of those original positions. And I’m doubling down — literally tripling down — on the ones that earned their spot.

Read more

The Setup

About three weeks ago, I hit a wall with my portfolio. Not a financial wall—a philosophical one.

I was sitting on roughly $854K in a Fidelity Individual account, generating around $180K annually in distributions. Sounds stable, right? The problem wasn’t the income. The problem was where it was coming from.

I had massive concentration in high-yield, options-based ETFs—funds with yields in the 30-45% range. ARMW at 133%, GDXY at 44.5%, EGGY at 28%. These funds deliver incredible income, but they come with a cost: NAV erosion. Every month, the fund eats itself to fund those distributions. Over time, that compounds against you.

I was also carrying significant tech concentration—QQQI at 16% of the portfolio, FEPI (FANG options), and multiple AI-linked positions. And I had zero international diversification.

So when the AI sector took a breath last week and the market corrected, I didn’t panic. I saw an opportunity.

The Rotation

Here’s what I exited:

Read more

If you’ve ever Googled that question, you’ve probably landed on the same answer everyone else gets: save a million dollars. Maybe two million. Follow the 4% rule. Don’t touch the principal. Hope it lasts.

But here’s what nobody talks about. Two people can retire with very different amounts of money — and the person with LESS can actually end up with MORE income, more security, and more money left over at the end.

I ran the math. And the numbers completely changed how I think about retirement.

Before I get into it — I want to hear from you. When do you want to retire? And more importantly, what’s your plan to create income when you do? Leave a comment. I’m asking because I’m already there. I retired from corporate in 2023 and I’m living off my portfolio income right now — while continuing to build my snowball so I can keep traveling and living life on my terms.

I’m not asking from the sidelines. I’m in it.

Quick disclaimer — I’m not a financial advisor. Everything I share here is what I’m personally doing and researching in my own portfolio. This is education, not advice. Always do your own research before putting your hard-earned money to work.

Where the 4% rule came from

If you’re going to follow a rule, you should at least know who wrote it and why.

In 1994, a financial planner named William Bengen published a paper called “Determining Withdrawal Rates Using Historical Data.” He looked at every 30-year retirement period going back to 1926. The Great Depression. World wars. Stagflation in the ‘70s. Every major market crisis.

His question was simple: what’s the most a retiree could withdraw each year — adjusted for inflation — and never run out of money over 30 years?

His answer: about 4%.

Four years later, three professors at Trinity University in Texas ran a similar study. Same conclusion. And the “4% rule” was officially born.

Here’s the thing. That research assumed a 60/40 portfolio — sixty percent stocks, forty percent bonds. It assumed a 30-year retirement window. And it was built using data where bond yields were significantly higher than what we see today.

This rule was designed over 30 years ago, using market conditions that no longer exist, for a retirement window that many people will outlive.

And yet — it’s still the default advice for millions of Americans.

What the 4% rule actually requires

Let’s run the math with a real number. Say your lifestyle costs $75,000 a year. That’s what you need to live comfortably.

Under the 4% rule, you take your annual need and divide by 0.04.

$75,000 ÷ 4% = $1,875,000.

You need nearly two million dollars saved before you can retire.

And here’s the part that really gets me. Every single year, you have to SELL your investments to generate that income. Year one — you sell $75,000 worth of stock. Year five — you’re selling $84,000 because of inflation. Year ten — nearly $98,000. Year twenty — over $131,000.

Over 20 years — from age 65 to 85 — you will have sold over $2 million worth of assets just to live.

In a perfect world with a steady 7% average return, the math works. Your portfolio actually grows to about $3.4 million by 85. But here’s the catch — you had to start with $1.875 million, you had to sell assets every single year, and you’re sitting on a fortune at the end that you’ll probably never spend.

That doesn’t sound like freedom to me. That sounds like a savings account with extra anxiety.

The 8% rule — same problem, bigger risk

Now let’s talk about the 8% version. This has been making the rounds in FIRE circles and from some well-known financial personalities. The argument: the stock market averages 10 to 12% per year, so why not pull 8%? You’re still leaving a cushion.

$75,000 ÷ 8% = $937,500.

Half the savings needed. Same lifestyle. Sounds great.

In a perfect world — smooth 10% returns every year — it works. Your portfolio stays above a million the entire time.

But the world is not perfect. And this is where the 8% rule falls apart.

I ran a scenario where a bear market hits in the first three years of retirement. Down 20% year one. Down 15% year two. Up only 5% year three. After that, the market returns to a normal 10%.

Your money runs out at age 75.

Ten years into retirement. Gone. Zero. You’re 75 years old with no portfolio, no income, and a decade of life left to fund.

That’s not a worst-case fantasy. Bear markets at the start of retirement have happened multiple times in the modern era. It’s called sequence of returns risk. And if you’re withdrawing 8% when it hits, it will destroy your plan.

The 8% rule works on a whiteboard. It does not work in the real world.

The third approach — income investing

What if instead of saving two million dollars and slowly eating it... you built a portfolio that PAYS you?

Not by selling shares. Not by drawing down your nest egg. But by collecting distributions — real cash — from investments designed to generate income.

This is income investing. And it changes the entire equation.

Same $75,000 lifestyle. But instead of withdrawing 4% or 8%, I’m collecting income from a blended portfolio yielding around 11%.

$75,000 ÷ 11% = $681,818.

Less than $700,000. Not two million. Not even a million. Under seven hundred thousand dollars — to generate the same $75,000 per year.

And here’s the difference that changes everything. You never sell a single share. Your income comes from distributions. Dividends hitting your account every week or every month.

Over 20 years, you collect the same $2 million in total income. But you sell zero dollars in assets. Zero. And with even a conservative 3% price appreciation, your portfolio grows from $682,000 to over $1.2 million.

The 4% rule needs $1.875 million and still requires selling assets every year. Income investing needs $682,000 and you keep every share you own.

Same lifestyle. Less than half the starting capital. No selling. And you end with MORE money.

That’s not theory. That’s math.

The side-by-side comparison

Here’s all three approaches laid out for a $75,000/year lifestyle from age 65 to 85:

Assumptions: 4% rule uses 7% avg return (60/40 blend). 8% rule uses 10% avg return (100% equities). Income investing uses 11% distribution yield with 3% price appreciation. All scenarios adjust for 3% annual inflation. Past performance is not a guarantee of future results.

Same income. Same lifestyle. Completely different outcomes depending on the approach.

Why this works — and how I structure it

I’m not going to pretend this is magic. There’s no free lunch. Income investing has its own risks — NAV erosion, distribution cuts, sector concentration. I’ve been burned. I’ve talked about those lessons before.

But here’s what I’ve learned: the risk isn’t in the income. The risk is in not having a structure.

That’s why I use what I call the 3-Bucket System: an Income Engine for high-yield funds that pay the bills today, Core holdings for stable broad market income, and a Defensive Moat for protection when markets get ugly. I’ll be doing deeper dives on each of these in future posts.

And I use the PLAN framework: Purpose and Patience. Learn the Landscape. Asset Allocation. Net Income Focus. Every dollar has a job — and the PLAN makes sure those jobs are assigned with intention, not impulse.

Here’s what this looks like in real life. My portfolio is sitting at $875,000. It’s generating $222,749 a year in passive income. That’s over $18,500 a month. And my yield is sitting at 25.45%.

Now — I know what some of you are thinking. 25%? That sounds aggressive.

You’re right. It is. On purpose.

I’m in what I call the building phase. I retired from corporate in 2023, but I still have part-time active income — coaching, content, projects I choose to take on. That active income covers my lifestyle right now. Which means every single dollar my portfolio generates gets reinvested. Every distribution goes right back in — growing my snowball, adding to my core positions, compounding.

Because I still have active income as a safety net, I can afford to carry higher-yield, higher-risk positions in my Income Engine bucket. I’m using that yield to accelerate the build. That’s the whole point of the building phase — you take strategic risk while you can absorb it.

But here’s the important part. When I’m ready to fully step away — no more active income, no more side projects — I’ll rotate out of those aggressive positions and into my Core and Defensive buckets. SPYI. QQQI. MLPI. IAUI. Funds that yield 10 to 14% with more stability and less volatility.

That’s the transition. Building phase to income phase. Acceleration to sustainability.

And that’s exactly why I used 11% in the scenario math — because that’s the yield range of a fully rotated, retirement-ready income portfolio. Not 25%. Not the aggressive stuff. The Core. The Foundation. And even at 11%, the math crushes the 4% rule.

I don’t sell a share to fund my life. My distributions pay for everything. And right now, while I’m still building, those distributions are making the snowball bigger every single week.

The real question

The 4% rule asks: how much can I afford to spend before my money runs out?

Income investing asks: how do I build something that pays me forever?

One is a countdown. The other is a system.

I know which one I chose.

I want to hear from you — which approach makes more sense? Are you still following the 4% rule? Have you started building your own income snowball? Drop a comment below.

📺 I made a full video breaking this down with visuals, charts, and the complete math walkthrough. Watch it on YouTube here.

🧮 Want to figure out your own freedom number? My Freedom Calculator is completely free — it helps you determine how much income you need and your timeline to get there. Grab it here.

If it doesn’t challenge you, it doesn’t change you. Messy action is better than no action.

— Rico

If you’ve been reading this newsletter for any amount of time, you know where I stand on single-stock covered call ETFs. I’ve owned them. I’ve been burned by them. I’ve made videos about why they’re dangerous for income investors.

And then I bought one.

ARMW — the Roundhill ARM WeeklyPay ETF. A small $2,000 test position. Not a conviction play. Not something I’m growing. But a position I opened with my eyes wide open, for one reason and one reason only.

I’m bullish on ARM Holdings.

Not the fund structure. Not the leverage. Not the weekly distribution gimmick. The company. And that distinction matters more than anything else I’m going to say in this article.

Let me walk you through the data, the comparison, and exactly how I’m managing this so it doesn’t become another expensive lesson.

Read more

The May numbers are in. Portfolio is sitting at approximately $892,000 as of June 1st, with annual passive income tracking around $150K. We were at roughly $888K in mid-May — so the portfolio held steady and nudged forward through what was a genuinely choppy month.

That’s the whole point of building it this way. Every dollar has a job. The income keeps coming whether the market is calm or throwing a fit.

Let’s walk through every move.

The Standout: CHPY at +38%

CHPY — the YieldMax Semiconductor Income ETF — is sitting at a +38.68% total gain since I started the position. That’s price appreciation on top of the weekly distributions it’s been generating the whole time.

Read more

When State Street launched their sector covered call ETF suite in July 2025, they didn’t launch three or four funds. They launched eleven. That’s a covered call ETF for every major SPDR sector — and not all of them are worth your attention.

I’m currently running three of them (XLUI, XLII, XLBI) and here’s how I’d think about the rest.

The full XL covered call suite

State Street built these funds on top of their SPDR sector ETFs — the same institutional-grade sector funds that have been around for decades. The covered call overlay generates monthly income. The expense ratio across the suite is 0.35%.

The ones I’m watching most closely:

XLUI — Utilities. Already running. Highest yield, best NAV stability, most non-correlated to my existing holdings. For most income investors, this is the first XL fund worth adding.

XLII — Industrials. Already running. Reshoring trends, infrastructure spending, and defense budgets all support this sector. Good diversification from tech.

XLBI — Materials/Chemicals. Already running. Most tariff-exposed of the three. Sized smallest. Worth watching as trade policy evolves.

XLVI — Healthcare. I haven’t added this yet. Healthcare is defensive — similar to utilities in its insulation from economic cycles. The covered call premiums on healthcare stocks are meaningful and the sector has strong demographic tailwinds. This is next on my watchlist.

XLFI — Financials. Interesting because financials benefit from elevated rate environments that often hurt other sectors. A covered call ETF on banks and financial services could be useful for rate cycle diversification.

XLSI — Consumer Staples. Defensive, low-volatility sector. Similar rationale to utilities. Lower yield potential but high stability.

The ones I’d approach with more caution

Energy sector XL fund. Energy is commodity-driven and geopolitically sensitive. The volatility generates premium income but the NAV can move dramatically with oil prices. Worth understanding before adding.

Technology sector XL fund. Given that most of my existing Bucket 2 is already tech-adjacent, adding a tech-specific covered call ETF would increase concentration rather than diversify it. This one I’d actively avoid for my specific portfolio.

The honest framework for evaluating any sector covered call ETF:

Does this sector move independently from what I already own? If the answer is no, the diversification argument doesn’t hold regardless of how attractive the yield looks. If the answer is yes, run it through PLAN and size it appropriately.

→ I’ll be publishing PLAN analyses on each new XL fund I add in the paid newsletter: newsletter.riconasol.com $9/mo · Paid subscribers get every new position analyzed before I deploy capital.

Someone in the community asked: “Does a higher share price for CHPY equate to more dividends?”

Short answer: not necessarily.

I know that feels counterintuitive. CHPY has been on a tear — the fund launched in April 2025 around $40, and as of late May 2026 it’s trading near $81. That’s roughly a 100% price increase in just over a year. So it seems logical that dividends would follow, right?

But here’s the thing. CHPY’s weekly dividend payments tell a different story. Look at the actual payouts:

• April 2025 (launch): $0.34–$0.36/week

• May 2025: $0.37–$0.62/week

• August 2025: $0.38–$0.40/week

• October 2025: $0.40–$0.57/week

• January 2026: $0.48–$0.52/week

• March 2026: $0.45–$0.52/week

The share price nearly doubled over that stretch, but the weekly payouts bounced between roughly $0.34 and $0.62. No steady climb. No correlation. Just... fluctuation.

Why? Because the dividends from a covered call ETF like CHPY aren’t driven by the share price. They’re driven by the premiums the fund collects from selling options.

And that changes everything about how you should think about these funds.

So How Does a Covered Call ETF Actually Make Money?

Let me walk you through this in the simplest way I can.

CHPY holds a portfolio of 15 to 30 semiconductor stocks — names like NVIDIA, Broadcom, AMD, Micron, Marvell. Real companies. Real shares. That part is straightforward.

But here’s where it gets interesting. The fund then sells call options on those stocks. When you sell a call option, you’re essentially telling someone: “I’ll give you the right to buy my shares at a specific price (the strike price) by a specific date. In exchange, you pay me a premium right now.”

That premium? That’s the income. That’s what becomes your weekly dividend.

The fund isn’t waiting for stock prices to go up to pay you. It’s collecting premiums from options contracts every single week.

What Determines How Big the Premium Is?

This is where it gets nuanced, and why the dividends fluctuate so much.

The premium a fund collects depends on a few things:

Volatility is the big one. When semiconductor stocks are swinging wildly — earnings season, geopolitical news, AI hype cycles — the premiums get fatter. Buyers are willing to pay more for options when they think big moves are coming. Calm markets? Smaller premiums.

The call spread matters too. This is the distance between where the stock is trading now and the strike price the fund sets when selling the call. A tighter spread (strike price closer to current price) generates a higher premium but caps more of the upside. A wider spread collects less premium but lets the fund participate in more of the stock’s gains. CHPY’s managers are making these decisions constantly, adjusting based on market conditions.

Time to expiration also plays a role. Options that expire sooner have less time value, so they generate smaller premiums. Longer-dated options pay more but carry more risk.

So when you see CHPY’s dividend jump from $0.38 one week to $0.57 the next, it’s not because the share price moved. It’s because volatility spiked, or the fund adjusted its call spread, or a cluster of options expired in a favorable way.

Why I Stopped Writing Covered Calls Myself

I’ll be honest with you — I tried doing this on my own. Back in 2023, NVIDIA was on an absolute bull run, and I thought I’d get in on the covered call action.

Here’s what I learned real fast: to write even one call option, I needed 100 shares of the stock. At the time, I had enough to write exactly one contract.

My monthly take? About $25.

Twenty-five dollars. For locking up thousands of dollars worth of NVIDIA shares and capping my upside on a stock that was ripping higher every week. It just didn’t make sense for me to keep doing that.

Meanwhile, a fund like CHPY is executing thousands of options contracts simultaneously across 15 to 30 semiconductor stocks. They have the capital, the volume, and the infrastructure to generate meaningful premiums at scale. That’s the leverage you get by letting a fund do this for you.

I realized I’d rather own the fund, collect weekly income, and let the professionals handle the options desk.

So What Should You Actually Watch?

If the share price isn’t the dividend driver, what should you pay attention to?

Watch the premium environment. Are semiconductor stocks volatile right now? Earnings season coming up? New tariff announcements or AI chip regulations? Those conditions tend to produce higher premiums and bigger weekly payouts.

Watch the distribution trend over time, not week to week. One big week doesn’t mean the fund is suddenly paying more forever. One small week doesn’t mean it’s broken. Look at the rolling averages.

Understand the trade-off. CHPY’s upside is capped because the fund is selling calls on its holdings. When semiconductors moon, CHPY won’t capture all of that move. That’s the cost of the income. You’re trading potential price appreciation for consistent weekly cash flow.

Don’t confuse yield with return. If CHPY’s share price goes up and the dividend stays the same, your yield percentage actually goes down — even though your total return might be great. Yield is a math equation: annual dividends divided by share price. When the denominator gets bigger and the numerator stays flat, the percentage shrinks.

The Bottom Line

A higher share price for CHPY doesn’t automatically mean higher dividends. The income comes from options premiums, and those premiums are driven by volatility, call spreads, and market conditions — not by where the stock price sits on any given day.

That’s not a bad thing. It’s actually what makes covered call ETFs powerful for income investors. The income engine runs somewhat independently from the price action.

But you need to understand the mechanics so you’re not chasing a number that doesn’t work the way you think it does.

Messy action is better than no action at all — but informed messy action is even better.

Want to figure out how much income you actually need to cover your expenses? Try the Freedom Number Calculator — it takes about 2 minutes and shows you exactly what your number looks like based on your risk profile.

And if you found this useful, subscribe to the Freedom Builder newsletter. I break down income investing concepts like this every week so you can build a portfolio that actually pays you. Hit that subscribe button — let’s build together.

The most common question I get after someone calculates their Freedom Number is: “Okay, I have $X to invest. Do I put it all in at once or spread it out?”

My answer is almost always the same: spread it out. Here’s the framework I use and why.

The problem with lump sum entry into income ETFs

Income ETFs — especially covered call ETFs — have a specific risk at entry that most investors don’t think about: you can buy at a NAV high right before a sector correction and spend months collecting distributions while your principal is underwater.

This isn’t hypothetical. It’s happened to me. It’s happened to every income investor who’s been doing this long enough. The distribution keeps hitting your account while the portfolio value sits below your cost basis, and the psychological pressure to sell is enormous — even when the math says hold.

DCA doesn’t eliminate that risk. But it spreads it across multiple entry points, which means you’re averaging into the position across different market conditions rather than committing everything to one moment in time.

How I DCA in practice

When I add a new position — like I’m currently doing with XLUI, XLII, and XLBI — I set a weekly investment amount and deploy it consistently regardless of what the market is doing. Not daily, not monthly. Weekly.

Weekly gives me enough data points to average across different price levels without the psychological burden of watching daily price movements. Monthly is too infrequent — I miss too many price points and end up with a de facto lump sum entry.

The other rule: I don’t stop when the price drops. The whole point of DCA is that lower prices mean more shares for the same dollar amount. A position dropping 10% after I start buying is not a reason to stop — it’s a reason to appreciate that my next weekly purchase bought more shares.

When DCA makes the most sense

DCA is most valuable when:

You’re entering a volatile sector. The more volatile the underlying, the more DCA smooths your entry. A utilities ETF like XLUI is relatively stable — DCA matters less there. A single-stock YieldMax fund on a volatile tech name — DCA matters enormously.

Macro uncertainty is elevated. When tariff policy, interest rate decisions, or geopolitical events are creating sector-level uncertainty, committing a full lump sum is a bigger bet on timing than usual. DCA takes timing off the table.

The position is large relative to your portfolio. The bigger the position as a percentage of your total portfolio, the more important DCA becomes. A 2% position can be lump-summed without much consequence. A 15–20% position deserves a more careful entry.

The two situations where I’d consider lump sum

If I had high conviction in a specific catalyst — an earnings release that I expected to be strong, a policy announcement that would benefit a sector, a technical setup that suggested a bottom — I might deploy faster. But I’m an income investor, not a trader. I don’t make those calls often and I’m usually wrong when I try.

The other scenario is if I’m contributing to my core positions. If I’m a newer investor or if I had some sort of cash windfall, then I’d consider lump sum investing into my core. For me, that’s stable funds like QQQI and SPYI.

For most income investors, most of the time: DCA, stay consistent, let the distribution income work while you build the position.

→ Every week in Freedom Builder I share what I’m buying and at what pace: newsletter.riconasol.com Paid subscribers ($9/mo) see my actual weekly DCA amounts and the positions I’m building.

This is my favorite thing to write. Because this is what makes income investing real — not the theory, not the frameworks, not the YouTube videos. The actual monthly check from your own portfolio.

Every month, I share exactly what my portfolio paid me, what changed, and what I’m thinking about going into next month. No rounding up. No cherry-picking the good months. All of it.

Let’s get into April.

Total dividends received: $18,522.88

That’s up from $15,641.58 in March — an 18.4% increase month over month.

Before you get too excited, understand why that number jumped. It wasn’t because I discovered some magic new fund. It was because of two things: CHPY paid out significantly more in April ($5,089 vs $1,654 in March), and I had new positions start paying for the first time. More on both below.

The real lesson here? When you build a diversified income engine, some months are going to surprise you to the upside and some months are going to disappoint. What matters is the trend line, not any single month.

Breakdown by position

Here’s every position that paid me in April, ranked by income:

Read more

Welcome back, welcome back. Rico here.

If you’ve been following my journey for any amount of time, you know I’m a big NEOS fan. QQQI is my largest holding. SPYI is my portfolio glue. The 1256 contracts, the tax efficiency, the data-driven call writing — I’ve talked about why I trust their approach in video after video.

So when NEOS dropped two brand new “Boosted” versions of my two favorite funds back in February? Yeah. I paid attention.

Today I’m breaking down XSPI and XQQI — what they are, how they compare to the originals, and what I’m personally doing with them. This is also the topic of this week’s YouTube video, so if you want the full visual breakdown with charts and side-by-side comparisons, keep an eye out for that dropping soon.

Let’s get into it.

Quick disclaimer — I’m not a financial advisor. Everything here is what I’m personally researching and doing in my own portfolio. This is educational, not advice. Always do your own research before investing your hard-earned money.

What Are XSPI and XQQI?

Both launched on February 2nd, 2026. So we’re looking at roughly three months of live data. That’s it. I want to be upfront — this is early. Really early.

XSPI is the NEOS Boosted S&P 500 High Income ETF. Think of it as SPYI’s bigger sibling. Same foundation — holds S&P 500 stocks, writes covered calls using SPX index options, uses 1256 contracts for tax efficiency. But XSPI adds a synthetic options layer that gives it approximately 150% notional exposure to the S&P 500. Not through daily-reset leverage. This is done through longer-dated index options.

XQQI is the same concept for the Nasdaq-100. QQQI’s bigger sibling. Same stock portfolio. Same covered call strategy with NDX index options. Same 1256 tax treatment. Boosted to approximately 150% notional exposure.

NEOS also launched a third boosted fund — XBCI, the boosted Bitcoin version of BTCI. I’m not covering that one today. Personally it’s less compelling to me because BTCI already has a higher yield and gives direct Bitcoin exposure. The boosted Bitcoin version just isn’t calling my name the same way.

The Key Numbers

XSPI: Distribution target of 15-18% annualized. Current distribution rate around 17%. Net assets roughly $37 million. Monthly distributions. Expense ratio: 0.98%.

XQQI: Distribution target of 19-23% annualized. Current distribution rate around 20.6%. Net assets around $93 million — significantly more, which tells me investors are gravitating toward the Nasdaq version. Also monthly. Same 0.98% expense ratio.

Now here’s the thing I want to flag immediately. SPYI and QQQI both have an expense ratio of 0.68%. These boosted versions come in at 0.98%. That’s a 30 basis point jump. On a $100,000 position, that’s an extra $300 a year. Does the extra yield justify the extra cost? That’s the central question.

Do the Holdings Actually Match?

Before I looked at performance, I wanted to look under the hood. If these funds are supposed to track the S&P 500 and Nasdaq-100, I want to make sure they actually do.

Short answer — yes.

XSPI’s top holdings mirror SPY almost identically. Nvidia, Apple, Microsoft, Amazon, Alphabet, Broadcom, Meta, Tesla — all within a percentage point of SPY’s weightings. The one difference is an SPX index call option position sitting at about 5.2% of the portfolio. That’s the boosted component. That’s the synthetic exposure showing up.

Same story with XQQI and QQQ. Top holdings are nearly identical. The NDX call option position at about 6.8% is where the boost lives.

The equity side is not a mystery. These hold the same stocks. The differentiation is entirely in the options strategy.

Performance Since Launch — Price Return vs. Total Return

This is where it gets interesting. And I want to break this into two views because for income investors, the distinction matters.

Price return since launch (share price only, no distributions):

QQQ leads at about +7.6%. SPY at +3.7%. XQQI at +2.1%. QQQI at +0.65%. SPYI at -0.7%. XSPI at -1.1%.

On price alone, the boosted versions are performing in the same neighborhood as the originals. XQQI is slightly ahead of QQQI on price. XSPI is slightly behind SPYI. But both boosted funds are paying out higher distributions, which naturally pulls the price down more.

Total return since launch (distributions included):

This is the number that matters. QQQ at +7.7%. XQQI right there at +7.6%. Almost identical. That is impressive for a fund paying out a 20% annualized distribution. QQQI at +4.3%. SPY at +4%. XSPI at +3.2%. SPYI at +2.3%.

On the Nasdaq side, XQQI is meaningfully outperforming QQQI on total return. On the S&P side, XSPI is outperforming SPYI as well.

But — three months is not a trend. Three months during a recovery from the tariff selloff is a very specific market environment. The boosted exposure helped these funds snap back harder because of that 150% notional exposure. In a sustained downturn, that same leverage works against you. We saw all of these funds dip 10-15% during the April correction. The boosted versions went a little deeper.

Early returns are encouraging. But I’m treating this as data, not a conclusion.

So What Am I Doing?

Here’s where I land.

The distribution targets are attractive. XSPI at 15-18% versus SPYI’s 11-12%. XQQI at 19-23% versus QQQI’s 13-14%. That’s meaningful extra income.

But it comes with a higher expense ratio. It comes with amplified downside risk during corrections. And these funds are three months old — no long track record, no full market cycle data, no recession test.

So I’ve opened very, very small test positions in both XSPI and XQQI. Just enough to have skin in the game. Real distributions hitting my account. Real NAV movement I can track with actual dollars — not just charts on a screen.

I’m going to hold these test positions and report back. I want to see if the distributions stay consistent. I want to see if the NAV erodes faster than the originals over time. Because that’s the real question — does the extra yield come at the cost of capital erosion, or does the boosted market participation offset it?

I’ve learned that lesson the hard way with other high-yield positions. Every dollar has a job — and one of those jobs is to not disappear.

QQQI and SPYI remain my core NEOS positions. XQQI and XSPI are in the testing bucket. If they prove themselves over the next six to twelve months, I could see increasing the allocation. But I’m not rushing. And when the data comes in, I’ll do a full follow-up.

I Want to Hear From You

Are you looking at these? Already in? Skeptical? Sticking with the originals? Drop a comment or reply to this post — I read every single one.

And if you haven’t already, check out the Freedom Calculator — it’s completely free and it can help you figure out your freedom number and timeline. Link is right here on Substack.

If it doesn’t challenge you, it doesn’t change you. Messy action is better than no action.

Talk soon — BOOM.

— Rico

About a month ago, I started a test.

I added four State Street sector-based premium income ETFs to my Defensive Moat bucket. The thesis: I’m very tech-heavy. QQQI, SPYI, CHPY, FEPI — incredible funds, but they all move with tech sentiment. I wanted to explore what non-tech income looks like.

Not because I’m bearish on tech. I’m extremely bullish. But concentration is a risk that sneaks up on you when you’re not paying attention. From my experience, the time to diversify is when you don’t feel like you need to.

So I started small. Test positions. Let the data tell me what to do next.

Here’s what the data said after 30 days.

Read more

Most of the covered call ETF conversation in the income investing community revolves around the same handful of names — YieldMax, NEOS, Roundhill. And for good reason. Those funds have track records, audiences, and content ecosystems built around them.

But in July 2025, State Street quietly launched something worth paying attention to: 11 sector-specific covered call ETFs, each built on top of their established SPDR sector funds — the same funds that have been institutional staples for decades. They added a covered call overlay and started generating monthly income from sectors most income investors had never touched.

I’m currently testing three of them in my own portfolio: XLUI (Utilities), XLII (Industrials), and XLBI (Materials/Chemicals). Here’s why I started looking at them and what I’ve found so far.

The gap these funds fill

My existing portfolio was heavily concentrated in tech and growth-adjacent covered call strategies. QQQI, SPYI, FEPI, CHPY, AIPI — these are all either directly tied to the Nasdaq, the S&P 500, or individual tech and semiconductor companies. When the tech sector sells off, most of my income engine sells off with it.

The question I started asking was: where are the covered call ETFs that generate income from sectors that don’t move with tech? Sectors that might actually hold up — or even benefit — when the Nasdaq is getting hit.

State Street’s XL suite was the answer.

Why sector-specific covered call ETFs are different

Most covered call ETFs use broad market indices — the S&P 500, the Nasdaq 100, or individual mega-cap stocks. When you own SPYI, your income and NAV are tied to the performance of 500 large-cap companies across every sector.

A sector-specific covered call ETF concentrates that exposure. You’re generating income from covered calls on a specific slice of the market — utilities, industrials, materials — rather than the whole thing. That concentration is a risk, but it’s also an opportunity: you can now build a genuinely diversified income portfolio where each position responds differently to different market environments.

A utilities covered call ETF behaves very differently than a tech covered call ETF in a rising rate environment. An industrials fund responds differently to infrastructure spending than a semiconductor fund does. That non-correlation is exactly what I was looking for.

The three I’m testing

XLUI — Utilities covered call. Utilities are domestic, regulated, and largely insulated from the kind of geopolitical and tariff-driven volatility that has hit the tech and materials sectors. When markets sold off hard during the March 2025 tariff announcements, XLUI barely moved. The NAV has been nearly flat since inception. The yield has been running around 19–20%.

XLII — Industrials covered call. Manufacturing, transportation, infrastructure. More economically sensitive than utilities but still diversifying relative to my tech-heavy existing holdings. NAV has been stable to slightly positive since inception. Yield running around 17%.

XLBI — Materials/Chemicals covered call. This one has the most direct tariff exposure of the three — chemicals and materials companies face real input cost pressure from trade policy. The NAV has shown modest erosion since inception, more than the other two. But the yield is real and the sector diversification argument still holds. I’m sizing this one smaller.

What I’m watching

I’m entering all three via DCA — adding weekly rather than deploying a lump sum. This gives me time to observe how each fund behaves across different market conditions before committing to a full allocation.

The expense ratio on all three is 0.35% — significantly lower than most of what I hold. State Street’s institutional infrastructure means these are well-managed, transparent funds without the black-box mechanics I avoid.

Full breakdown of each fund’s PLAN analysis is coming in the next paid issue.

→ Freedom Builder newsletter — free to start: newsletter.riconasol.com Paid subscribers ($9/mo) get the full PLAN analysis on all three XL funds.

Subscribe now

Quick confession before I start: when I first added CHPY to my portfolio, I thought the “CH” stood for China. It does not. CHPY is a YieldMax fund — specifically a Tidal Trust II YieldMax fund — built entirely on US-listed semiconductor and chip-adjacent companies. No China exposure. No FXI. Pure semiconductor sector income with a call spread overlay.

Once I pulled the actual holdings and understood what I owned, I liked it even more. Let me walk you through it using the PLAN framework — and then show you exactly what I hold and why.

This is a paid subscriber post. Upgrade to read the full issue — $9/mo.

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Quick confession before I start: when I first added CHPY to my portfolio, I thought the “CH” stood for China. It does not. CHPY is a YieldMax fund — specifically a Tidal Trust II YieldMax fund — built entirely on US-listed semiconductor and chip-adjacent companies. No China exposure. No FXI. Pure semiconductor sector income with a call spread overlay.

Once I pulled the actual holdings and understood what I owned, I liked it even more. Let me walk you through it using the PLAN framework — and then show you exactly what I hold and why.

This is a paid subscriber post. Upgrade to read the full issue — $9/mo.

Read more

Every ETF I evaluate, every dividend stock I consider, every position I’m thinking about adding — it goes through the same four questions. I call it the PLAN framework.

I didn’t invent these questions. I developed them over years of making investing mistakes that cost me real money, and then slowly figuring out what I should have asked before I pulled the trigger. PLAN is the shorthand for those four lessons.

P — Payout sustainability

The first thing I look at is not the yield. It’s whether that yield is sustainable. A 60% annual yield means nothing if the ETF is going to cut distributions in six months or if it’s eroding NAV to manufacture income.

What I look for: 12+ months of distribution history. Is it consistent? Growing? Declining? Has it been cut? I also look at the coverage ratio — is the ETF actually generating enough from its strategy to support the payout, or is it returning capital?

If the payout isn’t sustainable, nothing else matters.

L — Liquidity and structure

How does this ETF actually make money? What’s the underlying strategy? Who manages it and how do they implement the options overlay? Average daily volume matters too — if I can’t get in and out without moving the price, that’s a problem.

I want to understand exactly why this thing pays what it pays. If I can’t explain it in two sentences, I don’t own it.

A — Alignment with my income goals

Does this position fit where I am in my 3-Bucket System? A high-yield, high-risk covered call ETF might be appropriate for Bucket 2 but completely wrong for Bucket 1. A growth ETF that pays no dividend has no place in my income engine.

Every position needs a job. If I can’t clearly articulate what job this position is doing in my portfolio, I don’t add it.

N — NAV trend

This is the one most income investors skip — and it’s where they get burned. The NAV (net asset value) of an income ETF tells you whether you’re actually building wealth or slowly liquidating it.

The brutal math: If your ETF pays you 40% in distributions but its NAV drops 35% over the same period, your real return is 5%. That might still be acceptable — but you need to know the real number, not just the distribution headline.

I look at 1-year, 2-year, and inception-to-date NAV trends. A declining NAV isn’t automatically a dealbreaker — some strategies are designed that way. But I want to know what I’m buying into, and I want it to fit my overall picture.

Using PLAN in practice

When I’m evaluating a new ETF — AIPI, CONY, whatever’s making the rounds — I run through these four questions before I look at the yield number. In that order. If it fails on Payout sustainability, I stop there. If it passes all four, it earns a spot on my watchlist.

For paid subscribers, I run this framework explicitly on each ETF I cover in the deep-dive issues. You see my actual scoring, my actual reasoning, and whether I ended up buying it or passing.

Next week, paid subscribers get a full PLAN analysis on one of the most talked-about ETFs in the covered call space right now.

Want to see me run PLAN on my actual holdings — with real scores and real reasoning? That’s what paid subscribers get. $9/mo.

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This is my favorite thing to write. Because this is what makes income investing real — not the theory, not the frameworks, not the YouTube videos. The actual monthly check from your own portfolio.

Every month, I’m going to share exactly what my portfolio paid me, what changed, and what I’m thinking about going into next month. No rounding up. No cherry-picking the good months. All of it.

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If you’ve been watching the YouTube channel, you’ve heard me talk about covered call ETFs more than almost anything else. There’s a reason for that: they’re the engine behind my Bucket 2 income strategy, and they’re one of the most misunderstood investment vehicles out there.

People see a 30%, 40%, 60% yield and immediately think: scam. Too good to be true. There must be a catch.

Sometimes they’re right. Sometimes they’re wrong. The answer depends entirely on understanding what a covered call ETF actually does — and what it doesn’t do.

The basic mechanic

A covered call ETF owns a portfolio of stocks (or tracks an index) and simultaneously sells call options on those holdings. When you sell a call option, you collect a premium immediately. That premium is what gets paid out to investors as “yield.”

Think of it this way: you own a house and you rent it out. The rent is the premium income. The covered call ETF is doing the same thing with stocks — collecting regular income by giving someone else the option to buy at a specific price.

The trade-off: By selling call options, you cap your upside. If the underlying stock rockets past the strike price, you don’t fully participate in that gain. You already sold that potential to someone else. In exchange, you got paid income right now, regardless of what the market does.

Why this fits an income investing strategy

If your goal is growth — building a nest egg over 30 years — covered call ETFs are probably not your primary vehicle. The upside cap works against you in bull markets.

But if your goal is income — generating cash flow that replaces a paycheck — that trade-off flips completely. You’re not trying to capture maximum upside. You’re trying to generate consistent, predictable income. The covered call ETF does exactly that.

This is why they sit in my Bucket 2, not Bucket 3. They’re not growth vehicles. They’re income machines.

What most people get wrong

The biggest mistake I see is buying a covered call ETF purely based on yield percentage without understanding the underlying strategy. A 50% yield on an ETF that’s losing 30% per year in NAV (net asset value) is not a 50% yield. You’re just getting your own money back as income while the principal erodes.

This is why I use the PLAN framework when evaluating any ETF — and why I go through each position in detail for paid subscribers. The yield number is not the only number that matters.

The five things I look at before buying

Without getting into specific financial advice, here’s what I evaluate for every covered call ETF I consider:

1. The underlying index or stocks it holds — what’s actually in the portfolio?

2. The option strategy being used — full vs. partial coverage changes everything

3. The historical NAV trend over 12+ months — is the principal holding up?

4. The distribution history and consistency — has it been cut? Is it growing?

5. The expense ratio relative to the yield generated — what are you actually paying?

Each of those five things tells a different part of the story. A high yield with a declining NAV and inconsistent distributions is a red flag. A moderate yield with a stable NAV and growing distribution is a very different conversation.

Paid subscribers see me walk through all of this on my actual positions every month — which specific ETFs I hold, what the numbers look like, and what I’m watching.

The bottom line

Covered call ETFs are a legitimate income tool when used correctly — as an income-generating component of a diversified portfolio, not as a get-rich-quick play.

They pay you for owning them. That’s the deal. In exchange, you give up some upside. For someone trying to build income that replaces a paycheck, that’s often a trade worth making.

Next week, paid subscribers get my first monthly income report — real dividend numbers from my real portfolio, plus every move I made this month. If you’re not subscribed yet, that’s a good reason to start.

Want to see the specific ETFs I hold and what they’re yielding right now? Paid subscribers get the full picture — $9/mo.