I Ranked 12 Income ETFs — My Own Funds FAILED

I built a test. Four rules. Twelve income ETFs. Every one of them gets a score out of four.

Six of these funds are in my own portfolio. And I ran mine through the exact same test as everybody else's.

Two of the funds I own scored one out of four.

Geez. That doesn't sound promising, but stick around so I can explain.

I'm going to show you all twelve, tell you why my own funds failed, and explain why I still own them anyway.

The Four Rules

Rule one: cost. The expense ratio has to be under half a percent. That's not arbitrary. On an income fund, you're paying the fee out of the income. A high fee doesn't just cost you return, it eats the exact thing you bought the fund for.

Rule two: the distribution has to be earned. This is the one barely anyone checks, and it's the most important rule on this list. Every fund publishes a big yield number. But there's a second number, the SEC yield, which measures what the fund actually earned from dividends and interest. If the payout is huge and the earned number is tiny, the fund isn't paying you from income. It's handing you back your own money. That's called return of capital, and some of these numbers are genuinely hard to believe.

Rule three: since it launched, did it beat or match its own benchmark? Not my benchmark, its own. If a fund sells calls on the Nasdaq, I'm comparing it to the Nasdaq. That's the fair fight.

Rule four: would I personally hold this through a thirty percent drawdown? That one's always a tough judgment call, and it's mine. But it's the most honest rule here, because a fund you panic-sell at the bottom didn't do its job no matter what the spreadsheet said.

Those are the four rules. Let's run them.

The Bottom of the List: CHPY

Zero out of four.

I know, I know, some of my viewers love this one, so let me explain. This is a semiconductor option income fund, and the yield on it is the highest number in this entire post. People in my comments have been telling me to buy it for weeks.

Here's the problem. Its SEC yield, the number that measures what it actually earns, is negative.

Let me say that again. The fund is distributing a massive double-digit yield while earning nothing. On a recent distribution, about ninety-nine percent of it was return of capital.

Now, its share price has actually gone up since launch, and I want to be fair about that. But that's not because the strategy is printing money. It's because semiconductors ran hard enough to outrun the payout. The distribution isn't being covered. It's being hidden by a sector that went up.

The day semis go flat, that math shows up on your statement. Sorry, friends. Zero out of four.

One Out of Four: GPIQ and GPIX

These are the Goldman Sachs covered call funds. They're cheap, and they pass rule one easily.

But they both fail rule two, and they fail it hard. In a recent filing, about seventy percent of what these funds paid out was return of capital. Their SEC yields are close to zero.

They also lost to their own benchmarks, and they're not funds I'd personally hold through a crash. One out of four.

The Part I've Been Avoiding: QQQI and SPYI

QQQI. One out of four. SPYI. One out of four.

Dangit, I love these two funds. Well, you guessed it, I own both of these.

QQQI and SPYI both cost more than the half percent I set as my ceiling, so they fail rule one. Their SEC yields are effectively zero against double-digit payouts, so they fail rule two. And neither one beat its own index, so they fail rule three.

Zero out of three on everything I can actually measure with a number.

The only rule they pass is rule four. Would I hold them through a thirty percent drawdown? Yes, I would.

So let me be straight with you. Two of the funds sitting in my account right now failed three quarters of the test I just built.

Why I Still Own Them

Now let me tell you why I still own them, because this is the part that actually matters.

The test measures whether a fund is efficient. It doesn't measure whether a fund is doing the job I hired it for.

I own QQQI and SPYI in my income bucket. Their entire assignment is to produce cash every month. And they do that better than anything else on this list. That's the trade I made knowingly. High fee, capital being returned, capped upside, in exchange for the biggest monthly number available.

Is that the right trade? For a lot of people, no. Honestly, probably for most people, no. If you're thirty years old and building wealth, this is not what you want, and I'd tell you that all day long.

But here's the thing I want you to take away. I'm not going to sit here and pretend my own funds aced a test I designed. They didn't. I can hold a position and be clear-eyed about its flaws at the same time. Those two things are allowed to coexist.

If a channel only ever shows you scorecards where their own stuff wins, that's not a scorecard. That's probably some sort of sales page. And I'm here with nothing to sell you.

Three Out of Four: JEPI and JEPQ

Moving up. JEPI and JEPQ, three out of four each.

And JEPI gave me the biggest surprise in this entire test. JEPI pays a high single-digit yield. And its SEC yield, the earned number, is almost exactly the same as its payout.

That is the only high-yield fund in this entire group where the income is genuinely being earned rather than returned. The boring JPMorgan fund that nobody makes videos about is structurally the cleanest thing on this board.

Both JEPI and JEPQ lose to their own benchmarks, which is why they don't get a perfect score. That's what selling calls does. But they pass the other three, and I'd hold either one through a crash. Three out of four. Genuinely good funds.

Who Scored Four Out of Four

So who scored four out of four?

Five funds. SCHD. DGRO. SCHY. VOO. And SCHG.

But hang on. Two of those passed on a technicality.

VOO and SCHG scored perfectly because they're cheap, they track their index, and I'd hold them forever. All true. But they barely pay any income at all. Of course they passed an income safety test. They're not really playing the game. It's like winning a hot dog eating contest by not eating any hot dogs and never getting sick.

Let's be honest about this one, because VOO and SCHG technically aren't income ETFs in most people's book. Strip those two out, and out of twelve funds, exactly three real income funds scored four out of four.

SCHD. DGRO. And SCHY.

And I only own one of them.

Where I Land On This

The three winners are all boring, cheap, dividend index funds that pay you money the companies actually earned. That's not exciting. It won't get me a lot of clicks. It's just what the test says.

Two of my own funds scored one out of four, and I'm keeping them, because they're doing a job this test can't measure.

And the fund with the biggest yield in the whole post scored zero.

If you take one thing from this, take this. A big yield number tells you almost nothing on its own. The question is always where the money is coming from. If the fund isn't earning it, it's coming out of your own pocket and being handed back to you as an exciting push notification from your brokerage account.

I plan to run this exact test again in a few months. Same four rules.

If you're wondering where this whole ranking idea started, I did a version of this before, without rules — I ranked ten dividend ETFs and only owned five of them. You can see how much my thinking has changed in my original 10 dividend ETFs ranking.

Watch the full video above, or on YouTube: https://youtu.be/2HPIE_-ijFk