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All Encompassing Investment and Financial Planning Thread for the Surly 99.5%


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Posted

For the guys who jumped into ULTY, its better to consider it more of a hedge fund. They are typically invested in 15 different underlying stocks at a time, along with options contracts. There's not one single underlying fund they are focused on like it is for MSTY above with MSTR. In fact MSTY and MSTR used to be two of the funds invested in whenever the IV rate was higher.

Posted
59 minutes ago, StassneyHorn said:

It's all about the income generation for me and it allows me to spread out risk. This can let people retire early, retire from full time and go into part time work, have income while they travel the world etc. Every four weeks I know I can log into fidelity and have $1200+ being deposited from MSTY and I can use it, reinvest, buy underlying, or spread the investment around. I'm in about 8 others as well and every Friday, two of them pay me. I've bought the underlying twice at 450 and in the 480s--the absolute worst timing. I have not made money on the small investment into MSTR in my world, but have been better at throwing money into MSTY and receiving the distributions for a MUCH better total return. The dividend comes through options premiums and the synthetic positions created that track the underlying fund activity that has been pretty monstrous part for them as well. I don't have to sell any shares like I would with the underlying to get my money, that I'm in the red on.

While it's nonqualified and taxed as income, the firm is able to be creative about how they label ROC to create tax advantages for those who hold in individual accounts- if you have it in a Roth you're golden. ROC used as a tax tool and will eventually lower cost basis to 0, so it helps being a long term holder. There's a big misconception online about Return of Capital as they provide estimates monthly that aren't particularly accurate, but true it up for end of year statements. The CEO and fund manager have said these funds are meant to be compounding monsters rather than sucking up all the monthly payout to live on. Best to know what your number is for monthly income needed to live and spread across multiple funds and overpay quarterly taxes if you can afford it seems to be the best online strategy. They've only been around 2.5 years as a company, so nobody is an expert. Video below expands on it and can answer a ton of questions if you're considering.

 

Yeah, timing on entry points surely affects the comparative returns on MSTY vs MSTR, but my suspicion is that on average MSTR performs better than MSTY over most time frames.

image.png.b8f602e5900903d423c080c813700ba1.png

If however I choose the 2024 high for MSTR (11/20/24) as the start date of a comparison through today, than the MSTY edges out the return of MSTR. And if you look at the worst performing period of MSTR (11/20/24-04/08/25), MSTY also performs better

image.png.220b3d74484e8ff6d6f3c0eb851af94e.png

So small sample size, but it appears that when the underlying is moving bigly, and IV spikes, the options selling ETF performs better than the underlying. In periods of normal low volatility, the underlying will probably always performs better. Which makes sense because the options premiums the ETFs  can capture are lower. 

Ive been trying to mess around with ChatGPT more to automate shit, so I spent a bit of time this afternoon building a model that allows me to dump price data, dividend data, volatility etc... and have it compare returns assuming dividend reinvestment. Now I can dump in data from a lot more of the options selling ETFs to see what shakes out. Is there an IV sweet spot for the underlying that starts to throw the advantage towards the options selling ETFs? Its really more just an exercise to practice using AI and I'm not expecting to learn much more than higher IV = better performance on the ETFs. 

Posted (edited)

Big spikes help alot and I'll always love it when I see it, but there's capped upside to the fund when you blow through the weekly contracts and can't get them sold before busting. If you could go up to the edge of the lowest contract's strike price and sell out of the money on Friday afternoon, that's a great week. On days when there's a small loss or underlying is flat, you usually do a small percentage better as the time premium kicks in on the time decay of the contracts.  If the underlying shoots up and has a 8-10% day, I'll take that as well but you get diminishing returns. It makes more sense to view the investment like a weekly football game that you already sunk your money into, and after 4 weeks you calculate your net results.  

If the funds live long enough, you will make house money. Some will be a long wait, some may do it in under a year. TSLY has been a wild ride that I'm glad I'm not on, but I'm also in on CONY which is their fund that has a Coinbase underlying and it's been maddening.

Edited by StassneyHorn
Posted
19 hours ago, Blotto said:

Stupid question time on the concept of these option income ETFs. While I'm nominally familiar with MSTY, I haven't really done a deep dive but what am I missing? It appears to me that you would be better off just investing in MSTR, or at least that has been the case since the inception of MSTY...

image.thumb.png.d919c9dbf4db29ee4b32291a6077265e.png

While the chart above doesn't specifically indicate whether it is showing MSTY dividend reinvestment, I believe it does as I found a separate charting tool that specifically claims to factor in dividend reinvestment, and it provides very similar returns for $10K invested starting 2/22/24. 

I understand that one major difference between the two investments is the monthly income generation that MSTY provides and MSTR does not (assuming you dont take profits  by selling some). But it seems a strategy of holding MSTR and selling after a year would provide far better returns, especially when you consider that you will be paying tax on your MSTY dividend payouts according to your tax rate, rather than lower long-term capital gains rate on MSTR if you hold a year.

I spot checked a couple of other ETFs (TSLY/TSLA, NVDY/NVDA) and in both cases the underlying outperformed the ETF fairly significantly.  Is the theory that these option income ETFs will out perform the underlying stock in periods of down years? 

Here's the sites I used to generate the returns

https://portfolioslab.com/tools/stock-comparison/MSTY/MSTR

https://totalrealreturns.com/s/MSTY,MSTR

 

Not really.  The theory is that having access to your capital in a streamlined manner will enable you to allocate the income dollars to other things without having to tap into principle.  It increases your personal Velocity of Money and allows your dollars to do more than one job.  

I built a model with about 25% of the portfolio in various YieldMax funds, 45% in PULS, 10% each in VOO, IBIT, and TLT/ZROZ split, and have what amounts to a stable value portfolio running a 14% yield.  I've taken that yield and used it to expedite debt re-payments, insurance premiums, etc.  At the lowest point of the market (early to mid april), that portfolio was down about 6% on principle vs the nearly 20 that the market was down for a period.  It's not fully flat yet, but i'm still well ahead on total return and have a much more streamlined cash flow structure to show for it.  

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Posted
1 hour ago, StassneyHorn said:

@Trey3216- do you have any opinion/feeling on people utilizing ULTY to pay for their kids tuition payments? Car payments? responsible boat purchases? in regards to expediting debt repayment

I wouldn’t use just ULTY.  Like I said, I built a model with ULTY and several other YieldMax etfs to do it.  ULTY has the greatest principle/NAV degradation of their portfolio.   BIGY, YMAX, SDTY, QDTY, RDTY and MSFY, NVDY, and a few others mixed in for example.  

Posted
1 hour ago, StassneyHorn said:

@Trey3216- do you have any opinion/feeling on people utilizing ULTY to pay for their kids tuition payments? Car payments? responsible boat purchases? in regards to expediting debt repayment

if it sounds to good to be true, it probably is. Those returns sound like bullshit, and you don't want to be holding when it goes up in flames. If my spouse put the college fund money is some speculative bs, I would divorce her. 

Posted

The waters of high yield investments can be very difficult to navigate. At the end of the day any investment must have a decent total return in order to be successful.

Many high yield investments just end up eroding the principal, so the yields give a misleading view of the investment’s return. And to make it worse, they constantly turn unrealized gains into realized gains that are taxed. Not saying there’s not a place for higher yielding investments. Just really must understand how they get those yields. 

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Posted

I know it has been discussed a lot upthread and I intellectually knew the importance of long term tax planning, but damn...watching the lack thereof play out in real life in jolting.

I'm helping a family member who is recently widowed get their affairs in order and the double tax hit of RMDs plus the compression of the single filer brackets is staggering.

This exercise has made me rethink and take a second look at what i've done b/c  a lot of my planning has been based around the MFJ brackets and I hadn't fully digested the what-if / when there's a single payer.

Those 32 and 35 brackets come screaming up really quickly for a single payer with sizable taxable income due to pre-tax qualified plans or other taxable income.

Good problem to have nonetheless but damn, it hits hard and fast for an accumulator with high taxable income after the death of a spouse.

 

Posted
6 minutes ago, Reagan1k said:

I know it has been discussed a lot upthread and I intellectually knew the importance of long term tax planning, but damn...watching the lack thereof play out in real life in jolting.

I'm helping a family member who is recently widowed get their affairs in order and the double tax hit of RMDs plus the compression of the single filer brackets is staggering.

This exercise has made me rethink and take a second look at what i've done b/c  a lot of my planning has been based around the MFJ brackets and I hadn't fully digested the what-if / when there's a single payer.

Those 32 and 35 brackets come screaming up really quickly for a single payer with sizable taxable income due to pre-tax qualified plans or other taxable income.

Good problem to have nonetheless but damn, it hits hard and fast for an accumulator with high taxable income after the death of a spouse.

 

Yeah, but uh... If you are in the 32/35 you are...rich? 

How much fucking money could they possibly need if with RMD and their other income they are in those brackets? 

Be happy to pay it and move on. Paying taxes isn't losing money. 

Posted
2 hours ago, immamac said:

Good problem to have nonetheless but damn, it hits hard and fast for an accumulator with high taxable income after the death of a spouse.

i’m assuming if you’re gonna make $200 -$300k a year on your RMD and other retirement investments, you and your prenup should be able to fix that single status pretty damn quickly. 

Feel free to swap lives with me and subject me to that kind of hell.

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Posted
2 hours ago, Reagan1k said:

I know it has been discussed a lot upthread and I intellectually knew the importance of long term tax planning, but damn...watching the lack thereof play out in real life in jolting.

I'm helping a family member who is recently widowed get their affairs in order and the double tax hit of RMDs plus the compression of the single filer brackets is staggering.

This exercise has made me rethink and take a second look at what i've done b/c  a lot of my planning has been based around the MFJ brackets and I hadn't fully digested the what-if / when there's a single payer.

Those 32 and 35 brackets come screaming up really quickly for a single payer with sizable taxable income due to pre-tax qualified plans or other taxable income.

Good problem to have nonetheless but damn, it hits hard and fast for an accumulator with high taxable income after the death of a spouse.

 

Interesting point that while you can primarily plan on the most likely scenarios, you have to think through some of the less likely scenarios. And one person in a marriage dying before the other one is common.

it also speaks to strategies about converting funds to Roth earlier, when possible. I recognize that many with large retirement funds also have higher incomes and tax brackets while they’re working. That creates difficulties in converting to Roth.

 

Posted (edited)
3 hours ago, Reagan1k said:

I know it has been discussed a lot upthread and I intellectually knew the importance of long term tax planning, but damn...watching the lack thereof play out in real life in jolting.

I'm helping a family member who is recently widowed get their affairs in order and the double tax hit of RMDs plus the compression of the single filer brackets is staggering.

This exercise has made me rethink and take a second look at what i've done b/c  a lot of my planning has been based around the MFJ brackets and I hadn't fully digested the what-if / when there's a single payer.

Those 32 and 35 brackets come screaming up really quickly for a single payer with sizable taxable income due to pre-tax qualified plans or other taxable income.

Good problem to have nonetheless but damn, it hits hard and fast for an accumulator with high taxable income after the death of a spouse.

 

Nice problems to have

Edited by Mother mopar
Strains and shit
Posted

One more thing to consider for recently widowed is capital gains on primary residence. 

Exemption for married is $500k, drops to $250k for single but you have a year grace period i think. 

I've told my wife if I kick it, make sure to look into that. Downsize, save in maintenance, bills, and taxes (property and cap gains).

Posted
3 hours ago, Redneck Mutha said:

One more thing to consider for recently widowed is capital gains on primary residence. 

Exemption for married is $500k, drops to $250k for single but you have a year grace period i think. 

I've told my wife if I kick it, make sure to look into that. Downsize, save in maintenance, bills, and taxes (property and cap gains).

Can’t stand exemptions or other govt regulated amounts that are not tied to the CPI.

Posted
7 hours ago, Reagan1k said:

I know it has been discussed a lot upthread and I intellectually knew the importance of long term tax planning, but damn...watching the lack thereof play out in real life in jolting.

I'm helping a family member who is recently widowed get their affairs in order and the double tax hit of RMDs plus the compression of the single filer brackets is staggering.

This exercise has made me rethink and take a second look at what i've done b/c  a lot of my planning has been based around the MFJ brackets and I hadn't fully digested the what-if / when there's a single payer.

Those 32 and 35 brackets come screaming up really quickly for a single payer with sizable taxable income due to pre-tax qualified plans or other taxable income.

Good problem to have nonetheless but damn, it hits hard and fast for an accumulator with high taxable income after the death of a spouse.

 

I just spent weeks building spreadsheets to analyze these scenarios. Roth conversions are the mechanism to deal with that, or saving more in after tax accounts rather than just IRA’s. 

However, there was an interesting article written about the “widow tax” that debunks some of the perceived cost of it. The guy does make a decent point. It’s a bit along the lines of what Imammac is saying  

https://www.financialplanningassociation.org/learning/publications/journal/DEC23-widow-tax-hit-debunked-OPEN?fbclid=IwQ0xDSwLh_ehleHRuA2FlbQIxMQABHpKnpeidF9xh6NKlKm6oELFyhwwriQQx6E8LI7dbLLL91MCadhaAp7idd2kZ_aem_-ssQJ5Ve3SYMR9wW-42tKA

Posted

RMDs are necessary and I don’t have a ton of sympathy for someone who is pushed to 200-250k in taxable income and higher tax brackets. There was a deal with tax advantaged, retirement accounts that the owner would someday pay taxes on their accounts. Time to pay the piper.

Im going to assume an older person, who doesn’t want to take RMDs, already has plenty of money and assets. And they want to avoid a >30% bracket. I get it but start spending the money, or give it away. Or is it their eventual heirs that are ticked off?

Posted
17 minutes ago, Nice Guy Eddie said:

RMDs are necessary and I don’t have a ton of sympathy for someone who is pushed to 200-250k in taxable income and higher tax brackets. There was a deal with tax advantaged, retirement accounts that the owner would someday pay taxes on their accounts. Time to pay the piper.

Im going to assume an older person, who doesn’t want to take RMDs, already has plenty of money and assets. And they want to avoid a >30% bracket. I get it but start spending the money, or give it away. Or is it their eventual heirs that are ticked off?

Yeah, being gigged by RMDs means you don't need to take the RMD because you have other funds.

That's a terrible problem to have.

Being tax efficient is a worthy goal, but you can take it too far and I think it's often taken too far.

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Posted

Yep....As I said....It is a good problem to have and the couple was obviously affluent (through building their own business from the ground up and diligent savings).

They achieved most of their pre-tax savings before the Roth was a thing and then failed to take advantage of roth conversions - Big mistake on the latter. 

My point in all of this was the bigger picture and how conversion tax planning should also take into account the "what if" possibility of single filer vs. MFJ in 10-15 years.

The same would be true for the 22-30 brackets and a couple that is not as affluent, but still has sizable pre-tax balances. 

If those conversions don't hit while still MFJ, then that ship might sail. 

Assuming that one has many years to convert in the 22-24 brackets is fully dependent on maintaining that filing status.

 

Posted
15 hours ago, Nice Guy Eddie said:

Interesting point that while you can primarily plan on the most likely scenarios, you have to think through some of the less likely scenarios. And one person in a marriage dying before the other one is common.

it also speaks to strategies about converting funds to Roth earlier, when possible. I recognize that many with large retirement funds also have higher incomes and tax brackets while they’re working. That creates difficulties in converting to Roth.

 

My plan is Roth conversions to fill up my tax bracket from the end of W2 income until RMDs kick in, once it gets closer and I understand the situation better I could fill the next bracket as well. 
 

Currently mid career, good income and large pretax balances so it will be a problem in the future. 

Posted
1 hour ago, Reagan1k said:

Yep....As I said....It is a good problem to have and the couple was obviously affluent (through building their own business from the ground up and diligent savings).

They achieved most of their pre-tax savings before the Roth was a thing and then failed to take advantage of roth conversions - Big mistake on the latter. 

My point in all of this was the bigger picture and how conversion tax planning should also take into account the "what if" possibility of single filer vs. MFJ in 10-15 years.

The same would be true for the 22-30 brackets and a couple that is not as affluent, but still has sizable pre-tax balances. 

If those conversions don't hit while still MFJ, then that ship might sail. 

Assuming that one has many years to convert in the 22-24 brackets is fully dependent on maintaining that filing status.

 

There is also a strategy to see your money put to use before you die. I can understand that someone wants to play it safe and keep funds just in case they live to 105 or the more cynical view that they want to control their heirs a bit more, but there's also the good feeling of seeing how your life's work is benefiting others either through inheritance or donations.

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Posted
7 minutes ago, Nice Guy Eddie said:

There is also a strategy to see your money put to use before you die. I can understand that someone wants to play it safe and keep funds just in case they live to 105 or the more cynical view that they want to control their heirs a bit more, but there's also the good feeling of seeing how your life's work is benefiting others either through inheritance or donations.

For better or worse I've fallen into the role of financial sounding board for several family members and I'm seeing this play out too - both sides of the coin.

One giving with the only requirement being that the recipients then spend time with her to tell her all about the food they ate, the trip they took or the experience they had.  She's enjoying her money vicariously through the while she can.

Another is squeezing her dollars so tightly that the ink is oozing out of her fingers.  

Both have the same general amount of assets.  Guess which one is happier day to day?

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Posted
26 minutes ago, Reagan1k said:

For better or worse I've fallen into the role of financial sounding board for several family members and I'm seeing this play out too - both sides of the coin.

One giving with the only requirement being that the recipients then spend time with her to tell her all about the food they ate, the trip they took or the experience they had.  She's enjoying her money vicariously through the while she can.

Another is squeezing her dollars so tightly that the ink is oozing out of her fingers.  

Both have the same general amount of assets.  Guess which one is happier day to day?

The end goal of one's life shouldn't be the numbers on a spreadsheet or ledger, back of envelope, etc.

Posted
2 hours ago, Nice Guy Eddie said:

There is also a strategy to see your money put to use before you die. I can understand that someone wants to play it safe and keep funds just in case they live to 105 or the more cynical view that they want to control their heirs a bit more, but there's also the good feeling of seeing how your life's work is benefiting others either through inheritance or donations.

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