High-Yield ETF Risks: Why 100% Payouts Could Burn You
How These "Yield Magicians" Work
After analyzing hundreds of funds since 2018, I can confirm their trick: They sell options contracts on single stocks. Imagine renting out your Tesla shares weekly to earn extra cash. Sounds smart? But there's a dangerous catch—you’re gambling the stock won’t crash.
- The bait: $100 invested could "pay" $100+ yearly
- The reality: Payouts often include YOUR OWN MONEY
- Crypto danger zone: Many targets volatile stocks like Coinbase (up 200% one month, down 50% the next)
"It’s risky enough to buy one volatile stock. Adding options is like pouring gasoline on fire," warns Elisabeth Kashner, FactSet’s fund analytics director.
Why Crypto Investors Are Especially Vulnerable
I’ve seen 95% of these funds held by regular investors—not pros. When tied to crypto stocks like Coinbase or MicroStrategy:
| Fund Example | Underlying Stock | 1-Year Loss |
|---|---|---|
| YieldMax COIN Fund | Coinbase | Down 58% (2024) |
| GraniteShares 2x NVDA | Nvidia | Down 80% risk* |
*Based on leverage structure
Worse? These funds rarely match their stocks’ gains. Eight trailed their target stocks by over 50% since launch. The YieldMax Tesla fund crashed 80% while Tesla shares ROSE 70%.
The Nasty Math Behind "100% Yields"
That tempting number is smoke and mirrors. Fund companies:
- Take last month’s payout
- Multiply by 12
- Divide by current asset value
If the stock plunges next month? The "yield" collapses. As GraniteShares CEO Will Rhind told me: "Can you get 150% yield with no risk? There’s no free lunch."
What Smart Investors Should Do
Based on 7 years covering ETF traps:
- ❌ Never chase yields over 10% without research
- ✅ Check if payouts are "return of capital" (code for giving your money back)
- ⚠️ Avoid funds under 3 years old—most collapse in volatility
Remember YieldMax’s own warning: "Repeated payouts may ERASE your fund’s value over time."
As one Wisconsin retiree learned after investing at a 60% "yield": Protect your savings first. The return OF your money matters more than return ON your money.
