1 Ultra-High-Yield ETF Millions Are Buying That Could Wreck Your Retirement

High-yield ETFs are very popular during the AI market rally, as dividend investors feel they are missing out on all the action. Thus, they are buying ETFs like the Global X NASDAQ 100 Covered Call ETF (NASDAQ:QYLD) to make up for the “lost” gains. They get not just the dividends but “exposure to the Nasdaq-100.”

The issue is that most investors don’t understand what many of these ETF options do or which ones to pick. Some just choose the ones with the highest dividend yield, whereas others see some trading at a “discount” and hit buy. Doing this can wreck not just your portfolio, but your retirement if you keep making this mistake without understanding what’s going on.

Let’s take a look at why this specific ETF is among the most dangerous popular ETFs there are and which options ETFs you can go for if you want the extra yield.

QYLD is one of the worst names to chase

Before we look into why QYLD isn’t the best, let’s first take a look at what it does. The ETF generates high monthly cash payouts by holding the top 100 tech stocks in the Nasdaq and selling covered call options against them. This is rather basic with most options ETFs, but the results here are quite worrying.

You get an 11.63% dividend yield, with an expense ratio of 0.60%, or $60 per $10,000. It looks like a rather standard options ETF at first glance, but it’s actually one of the more dangerous ones.

QYLD is structurally the most aggressive income-over-growth design in the options ETFs category, and it ends up achieving neither in superior amounts.

Why QYLD keeps underperforming

QYLD writes call options on its entire portfolio at-the-money (strikes right at the current index level). This means it is 100% portfolio coverage and at-the-money call writing that severely caps upside potential. You do get more income compared to some safer names, but almost every time the Nasdaq-100 rallies past the strike, QYLD hands that gain to the option buyer instead of participating in the rally.

Newer ETFs fix this flaw by being more dynamic. ETFs like the Goldman Sachs Nasdaq-100 Premium Income ETF (NASDAQ:GPIQ) and the Goldman Sachs S&P 500 Premium Income ETF (NASDAQ:GPIX) participate in and capture far more of the upside because they use a range and average around 35-75% of their portfolios being written against at any given moment. Goldman writes fewer calls when it wants more equity participation and more when it wants richer income.

When you compare GPIQ against QYLD, the difference is massive.

You’re losing money by buying this

This ETF has $8.2 billion in assets, and that’s too much for a flawed ETF. QYLD is likely kept online because it’s an older legacy option that many investors are still parking their money in, but it has a newer sibling in the Canadian stock market, called QQCL, that came out a decade later. This sibling ETF does not write covered calls on its entire portfolio at once as QYLD does. That alone should tell you that Global X itself knows where the flaw is.

If you hold QYLD, I would suggest moving elsewhere. There are plenty of other safer alternatives among ETF options that use more modern techniques to generate a high yield without sacrificing much upside potential. Newer options ETFs are so efficient, in fact, that if you reinvest dividends (which you shouldn’t with these ETFs; just buy the underlying index if you plan to), your performance is within a few percentage points of the raw index.

I would look into GPIQ as a good substitute. If you are adamant about having more income, you can buy the NEOS Nasdaq-100 High Income ETF (NASDAQ:QQQI), which has not only captured more upside but has a higher headline yield at 13.87%.

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