Say you put ten thousand dollars into one of the most popular high-yield ETFs on the internet.
Over one year, it paid you almost thirty-four hundred dollars in distributions. What the hell is going on here? Is this too good to be true?
My guess is that you chose one of those weekly-paying funds that look like they are going to make you rich and let you retire in your thirties.
Now look at what the shares were worth at the end. Under two thousand dollars. You got paid, and you still lost almost half your money.
That’s NAV erosion. And there’s a test that catches it in about a minute with nothing but a calculator.
I ran it on QQQI, which I own, and on three funds I get asked about constantly. Three passed. One failed, and it wasn’t even close. Let me know in the comments on the video if you have ever owned the one that failed, because I know many people did.
But here’s the part I don’t want you to miss. Passing this test one year doesn’t make a fund safe. And one of these three has a number on its fact sheet that looks like it should have failed. We’ll get to that one.
What NAV Erosion Actually Is
NAV is net asset value. It’s what one share of the fund is actually worth, based on everything the fund holds.
When a fund pays you a distribution, that money leaves the fund. So on the ex-dividend date, the share value drops by about that amount. That’s normal, and it happens with every fund.
The question is whether the fund earns it back.
If the fund is making enough to cover what it pays you, the share price holds up over time. If it isn’t, the price slides, month after month, and the fund is just handing you your own money back. A high yield doesn’t tell you which one you’re looking at. But this test does.
The One-Minute Test
Here it is. Pick a window, at least a year.
Write down the share price at the start. Add up every distribution the fund paid during that window. Write down the share price at the end. What’s left is the distributions plus the change in price. That’s the money you actually made.
If the price held flat or went up, the fund passed. The payouts came from something real. That high-yield ETF is actually making money, which is what we want to see.
If the price went down, but what’s left is still positive, that’s a warning. You made money, but the payouts were bigger than what the fund grew. Not great, but it’s part of the high-yield ETF game we play.
And if what’s left is negative, the fund failed. It paid you with your own money and then lost more on top of it. This is what I run away from. And fast!
QQQI: Pass
I’ll start with the one I actually own, because it’s not fair to grade everybody else first.
At the end of August 2025, QQQI closed at $52.73 a share. At the end of August 2026, it closed at $54.60. So the price went up about a dollar eighty-seven a share. Not by a lot, but it went up. And during that same stretch, it paid out twelve monthly distributions. Add them up, and it’s about $7.65 a share.
QQQI passed. Yes! I love QQQI and currently hold 230 shares.
The fund paid a double-digit yield, and the share price still ended higher than where it started. And if you go back further, to when this fund launched, the share price today is still above where it started. So it’s not just one lucky year.
What happens in a bear market? I will make a video about that once it eventually happens.
SPYI and JEPQ: Pass and Pass
Next, SPYI. Same company as QQQI, same idea, but on the S&P 500 instead of the Nasdaq. Price went up, distributions on top. Pass. I recently started a position in SPYI and have thirty shares. My goal is to have a hundred by the end of the year.
Then JEPQ. That’s JPMorgan’s version on the Nasdaq, and it’s the biggest fund in this group by a mile. Price up the most of the three, and it’s the cheapest to own. Pass. I own 141 shares of JEPQ, and I am thinking of turning on the DRIP. (I ranked JEPQ, SPYI and QQQI against a lot of other monthly payers in my monthly dividend ETF post.)
So three for three. And I want to be straight with you about why that happened. These funds hold real companies and sell options on them. When those companies go up, the fund has room to pay you and still grow a little. It was a good stretch for big tech. In a bad year, even a good fund in this category can come up short on this test. That’s why you run it more than once.
MSTY: Fail
Now the one from the beginning.
MSTY sells options on one single stock, Strategy Inc. The company that used to be called MicroStrategy. It’s basically a bitcoin company run by Michael Saylor. I am sure you have seen one of his interviews somewhere talking about Bitcoin.
The yield on that fund has been in the triple digits. That’s the number that gets shared all over social media and hypes everyone up. Here’s the share price over the same window: down about eighty percent. And the fund did a reverse split along the way, which means if you glanced at the share price, it could look like it held up better than it did.
Now add every distribution it paid. Almost fifty of them, because it switched to paying weekly. Still deep in the red. Fail.
People got paid every single week, and the whole time, the thing paying them was shrinking. That’s what the test is for.
So if anyone reading this wants to give me money, I’ll slowly give it back to you, but I’ll take a little fee for myself. Hit me up! I’m obviously kidding, because I don’t manage other people’s money.
The Number That Looks Like It Should Have Failed
Now, remember I said one of the funds that passed has a number that looks like it should have failed? It’s mine.
QQQI’s SEC yield, the official measure of what the fund earns from dividends and interest after its fees, is negative. The fees are bigger than the dividends. And most of what it pays out gets labeled return of capital. If you only read those two things, you’d swear this fund is eating itself.
But the test says it passed. So which one’s lying?
Neither. The fund’s money mostly comes from selling options, and that premium doesn’t count in the SEC yield. And return of capital, for a fund like this, is mostly a tax label. It lowers your cost basis. It doesn’t automatically mean your principal is disappearing. (I went deeper on exactly this in my post on turning on QQQI’s DRIP.)
The share price is what tells you whether the principal is disappearing. That’s why I trust this test over the label.
Three Ways People Run the Test Wrong
This test is simple, which means it’s easy to run wrong. There are three ways people mess it up, and I’ve watched people do all three in the same argument.
The first one is the window. If you run it over three months, you’re mostly measuring what the market did that quarter. For me, one year is the minimum. If the fund’s been around longer, run it over the whole life of the fund too. That’s the one that really tells you something.
The second one is the reverse split. When a fund’s price gets low, it can combine shares so the price looks normal again. If you compare a price from before the split to a price after it, a fund that got crushed can look like it held up fine. Always use split-adjusted prices, and make sure the old payouts are adjusted too.
The third one is the chart you pull up. Some sites and apps show a total return chart, and that one already counts the distributions. If you add the distributions on top of that, you’ve counted them twice, and everything looks better than it is. You want the plain price chart.
Get those three right and the test doesn’t lie.
Yield Tells You How Much. Price Tells You Where It Came From.
So here’s what I need everyone to remember. A yield tells you how much a fund is paying. The share price tells you where that money came from.
If you only look at one of those, you’re guessing. And I don’t like to guess with my money. I don’t think you like to, either.
And here’s what’s bugging me now. MSTY pays weekly. A lot of the newest funds pay weekly. Weekly checks feel amazing, and they make it really hard to notice a price that’s sliding, because you’re looking at the check every Friday, not the chart.
I’m going to run this same test on the weekly payers next. Some of those results surprised me.
Before You Buy Your Next High-Yield Fund
Do this. It takes one minute.
Pull up the price chart for one year. Write down where it started and where it ended. Then go to the distribution history and add up every payment in that same year. Distributions plus the price change. That’s what’s left.
If the price is up, you’re looking at a fund that earned what it paid you. If the price is down but you’re still positive, go in with your eyes wide open. And if the total is negative, it doesn’t matter how big the yield is. You’re being paid with your own money. If that’s your style of investing, that’s cool, but that ETF is not making it into one of my investing bucket posts.
And if the fund is younger than a year, you don’t have enough history to run the test yet. That’s an answer too.
If you want to see how I decide how much of my money even goes into income funds like these, I wrote up how I split everything into buckets in The Investing Buckets Framework.
Watch the full video above, or on YouTube: https://youtu.be/WtF9IiZ-Aks
