WeeklyPay™ ETFs are a new type of exchange-traded fund designed to provide weekly income from various indexes, sectors and stocks. These ETFs aim to deliver weekly distributions to cater to investors seeking more frequent passive income. These funds typically use options-based strategies to generate higher yields and may therefore come with added complexity and risk.
One connundrum this new class of ETF's (exchange traded funds) aim to solve is the question of how to maintain exposure to growth assets which don't typically offer high dividends, while generating income. Of course, you could always try to time these assets by attempting to harvest gains periodically. Weekly Pays are an designed to offer a different approach.
Let's explore one hypothetical example of generating potential income from an asset class not known for high dividends, Digital Assets:
How do you maintain exposure to the seemingly unstoppable emergence of digital assets like Bitcoin and crypto without betting the house, suffering through brutal halving cycles, or constantly checking charts for the next price swing? And how could you potentially make your holdings work for you—earning steady income—without diving into the complexities of staking, security, and all the new nomenclature?
Let’s break it down.
Crypto Income:
Who says crypto investing has to be all about wild price swings and diamond hands? What if you could potentially generate steady income while still riding the blockchain wave? Enter LFGY, MSTY, STRK, STRF, and YMAG—a mix of ETFs, preferred stocks, and option-based funds that are designed to let you earn while you hold.
In this article, we’ll explore how each of these assets works, compare some of their benefits and risks, and build a hypothetical portfolio to see what passive income could potentially be generated. Spoiler alert: it’s looking pretty interesting.
*Please note that nothing here is financial advice. All investing and securities involve risk. You should always discuss your unique goals, risk tolerance and financial objectives with your qualified investment advisor before making any financial decision*.
Meet the Crypto Income Squad
LFGY (YieldMax Crypto Industry & Tech Portfolio Option Income ETF)
LFGY is an ETF that invests in crypto-related companies and uses covered call options to generate income. Instead of holding Bitcoin directly, it gives exposure to firms driving the blockchain revolution.
Potential Benefits: Weekly income distributions, exposure to crypto industry leaders, and reduced direct crypto volatility.
Potential Risks: Capped upside potential, high turnover, and regulatory risks affecting crypto firms.
MSTY (MicroStrategy Covered Call ETF)
MSTY is an actively managed ETF that sells covered calls on MicroStrategy (MSTR)—a company famous for holding massive amounts of Bitcoin. This strategy generates high option premiums, turning Bitcoin’s volatility into income.
Potential Benefits: Outsized yield potential (140% trailing twelve-month yield), exposure to Bitcoin without direct ownership, and weekly payouts.
Potential Risks: NAV erosion over time, dependency on Bitcoin volatility, and potential missed upside if Bitcoin rallies.
STRK (MicroStrategy’s Strike Preferred Stock)
STRK is a preferred stock issued by MicroStrategy, offering an 8% cumulative dividend. It provides a fixed income stream while maintaining exposure to Bitcoin through MicroStrategy’s holdings.
Potential Benefits: Fixed dividend payments, lower volatility compared to common stock, and indirect Bitcoin exposure.
Potential Risks: No maturity date, potential dividend delays, and sensitivity to MicroStrategy’s financial health.
STRF (Perpetual Preferred Stock with Fixed 10% Dividend)
STRF is a perpetual preferred stock backed by major financial institutions, offering a 10% fixed dividend. It is designed for long-term holders seeking stable income.
Potential Benefits: High fixed dividend, institutional backing, and redemption flexibility.
Potential Risks: Market volatility, regulatory uncertainties, and potential dividend disruptions.
YMAG (YieldMax Magnificent 7 Fund of Option Income ETFs)
YMAG is a fund of funds that invests in YieldMax ETFs, which use options strategies to generate income from the Magnificent 7 tech stocks—all of which are deeply involved in crypto, blockchain, and AI.
Potential Benefits: High yield potential, diversified exposure to multiple assets, and weekly income distributions.
Potential Risks: Limited upside due to capped gains, high volatility, and potential losses if underlying assets decline.
Hypothetical Portfolio and Income Analysis
Let’s take a look at a hypothetical $100,000 portfolio across all five assets, as of the time of this article:
Hypothetical Total Return Analysis
Assuming reinvestment of income at the same yield rates:
With reinvesting: The portfolio potentially grows at an annualized rate of 40.75%, compounding over time as it grows or declines with the underlying asset class.
Without reinvesting: The investor potentially receives $40,352 annually in passive income while the principal investment is subject to fluctuations as it grows or declines with the underlying asset class.
Conclusion
LFGY, MSTY, STRK, STRF, and YMAG may be example of income vehicles that offer a potentially powerful mix of crypto-related income strategies. MSTY and LFGY provide high-yield ETF plays, STRK and STRF offer fixed dividends, and YMAG adds diversified tech exposure of leading tech companies positioned to benefit the most from advances in crypto, blockchain and artificial intellgence (AI) . A balanced portfolio combining all five can potentially generate monthly income while maintaining some exposure to crypto markets. Of course, this exposure is both to the upside and the downside, although the income recieved and options overlays are designed to limit the volatility somewhat while producing income.
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*Please note that nothing here is financial advice. It is financial education shared to spur further inquiry and due diligence into these emerging asset classes and the new investing tools now available to both create a crypto-related stream of income, and to participate in this emerging phenomena with potentially less volatility.*
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Yes, the following chart is a little busy. But what you need to know is that the orange box represents bitcoin, and each year it appears on top means that bitcoin has beaten other asset classes available. That’s noteworthy. Of course, as with all investments classes, past performance is no guarantee of future performance.
So, if you're exploring ways to use this new class of weekly and monthly pay ETF's to turn your crypto holdings or other holdings into a potential cash-generating machine, here’s an idea or two to consider:
You could start in your regular investment account (or brokerage IRA) with perhaps $50 into each holding mentioned above. Set the monthly (and in some cases WEEKLY income/dividends to “reinvest”, and then consider adding more on occasional dips in the share price.
OR, you could simply let the income collect in high yield money market for a year or two until you have in a sense “shielded” your principle (recieved as much income as the amount you invested). Then let the original holdings reinvest for the forseable future, knowing you already took your (initial) investment off the table.
Remember, you don't have to go it alone.
Our team at Maendel Wealth can help you explore whether the new investment vehicles from Wall Street are a good fit for your portfolio, and help you avoid some of the potential pitfalls.
Give us a call or email us to start a conversation.
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