Why is There So Much Hate for Yieldmax Funds? – My Perspective on the Risks

With their outsized annual distribution rates and frequent cash payouts, YieldMax’s suite of exchange traded funds (ETFs) have garnered legions of devoted fans. Yet, not everyone is enthusiastic about YieldMax’s high-paying offerings.

Indeed, some critics on social media seem to suggest that there’s a dark side to YieldMax’s ETFs. Still, despite the controversy and disapproval surrounding YieldMax’s funds, there are viable ways to safeguard your wealth while indulging in these ultra-high-yield ETFs.

Love ’em or Hate ’em

The subset of YieldMax funds that have recently gained popularity is the company’s array of covered call ETFs. These funds use sophisticated option-writing strategies to derive extra income from well-known stocks.

All of YieldMax’s ETFs have a gross expense ratio of 0.99%, which will be automatically deducted from the share price on an annualized basis. In addition, YieldMax warns that its funds’ distributions “are not guaranteed.”

A gross expense ratio of 0.99% will reduce the shareholders’ returns over time, and prospective investors might feel that they can’t count on YieldMax to deliver its advertised distributions. So, why are so many traders attracted to YieldMax’s ETFs? 

First of all, YieldMax derives extra income from stocks that are already quite popular. To provide a few examples, the YieldMax NVDA Option Income Strategy ETF (NYSEARCA:NVDY) is based on NVIDIA (NASDAQ:NVDA | NVDA Price Prediction) stock; the YieldMax TSLA Option Income Strategy ETF (NYSEARCA:TSLY) is based on Tesla (NASDAQ:TSLA) stock; and the YieldMax AMZN Option Income Strategy ETF (NYSEARCA:AMZY) is based on Amazon (NASDAQ:AMZN) stock.

Tesla stock and Amazon stock don’t pay a dividend, and NVIDIA stock’s forward annual dividend yield is a paltry 0.02%. In contrast, YieldMax currently advertises an expected (albeit not guaranteed) annual distribution rate of 75.93% for NVDY, 64.06% for TSLY, and 54.26% for AMZY. Not only that, but these three ETFs pay out their distributions on a monthly basis.

Now, we can start to see why many traders either love or hate YieldMax’s ETFs. Even beyond the somewhat high expense ratios, commentators will debate whether the sky-high expected yields and the frequent payouts from YieldMax’s funds are real or just a mirage.

YieldMax ETFs: Considering the Risks

Along with YieldMax’s covered call ETFs, the company’s other notable funds include the following three, all of which pay out their distributions on a weekly basis:

• The YieldMax Ultra Option Income Strategy ETF (NYSEARCA:ULTY): 86.07% distribution rate; uses options-trading strategies on a variety of underlying stocks, some of which tend to be highly volatile
• The YieldMax Universe Fund of Option Income ETF (NYSEARCA:YMAX): 64.4% distribution rate; generates income from various YieldMax covered call ETFs
• The YieldMax Magnificent 7 Fund of Option Income ETF (NYSEARCA:YMAG): 66.5% distribution rate; generates income from YieldMax covered call ETFs based on Magnificent Seven stocks

As you can see, the advertised yields of YieldMax’s funds can get up into the stratosphere. On the other hand, the skeptics will often warn prospective shareholders about the potential for share-price erosion (sometimes referred to as net asset value or NAV erosion).

We can cite the NVDY ETF versus NVIDIA stock as an example. As of August 7, 2025, the NVIDIA stock price (not including dividends) gained 35.3% year-to-date.

During that same time frame, NVDY’s share price (again, not including dividends/distributions) declined by 25.16%.

Similar share-price erosion comparisons can be made with TSLY, AMZY, ULTY, and the others. The drawback of using certain options-trading strategies is that the share-price upside is limited; worse yet, the share price of a YieldMax fund can go down even if the underlying stock goes up sharply.

And to reiterate, there are risks associated with paying a fairly high annual expense ratio, as well as with investing in funds with advertised yields that could change dramatically at any given moment. Given these considerations, it’s understandable that some commentators would issue harsh warnings to eager YieldMax ETF investors.

A De-Risked Approach to YieldMax Fund Investing

The fierce debate between the YieldMax fund lovers and haters will undoubtedly continue throughout 2025. Amid the contentious arguments, however, it’s possible to find a middle-ground approach.

To start off, be sure to read the prospectus for any YieldMax ETF you’re considering buying. Each prospectus spells out the various risks associated with the fund.

Next, only invest in YieldMax funds that are based on underlying stocks you already like. For instance, don’t buy the NVDY ETF unless you’re optimistic about NVIDIA and about NVDA stock.

Most importantly, stick to very small position sizing with YieldMax ETFs. If you’re planning to buy shares of YieldMax funds, only purchase a few of them. Furthermore, keep your total position size of all YieldMax ETFs down to a tiny portion of your portfolio.

Then, continue to monitor your YieldMax fund positions and be ready to quickly exit any share position that goes awry. That way, you can sleep soundly at night with your YieldMax ETFs even as the fans and haters argue among themselves.