Want a 12% a year dividend on SPY? It’ll cost ya
Because yesterday Goldman Sachs finalized a deal for a 4 year old investment company that’s becoming popular among a certain demographic.
The company is NEOS Investments. Founded in 2022 with $30B already under management.
And the Wall Street Journal has a name for what these companies sell…
"Boomer candy"
(Their words, not mine)
I covered NEOS on a student call recently, before any of this happened.
Not because I had a grudge against them but because their flagship fund, SPYI, runs a version of the exact strategy I teach... but with far worse results…
Essentially they sell covered calls about the SPY (and other instruments for their other funds, including Bitcoin)
The headline is a 12% annualised distribution rate, paid monthly, marketed as tax-efficient.
So for a 60-year-old sitting on cash and watching money market rates drift down, that number sure sounds enticing…
But let's look at the reality… which is far less rosey.
Morningstar tracks the growth of a hypothetical $10,000 investment with all dividends and distributions reinvested.
Through 30 June 2026, $10,000 in SPYI since its August 2022 launch grew to $17,328. The same $10,000 in SPY grew to $20,030.
Scale that to a $300,000 portfolio…
SPYI: $519,840
SPY: $600,900
$81,000 short - and that figure already includes every single monthly distribution reinvested, so you can’t hit the copium by saying the income makes up for it. The income is included in that number.
There are two reasons for the gap, and every fund in this category behave the same way.
The first is the fee, as SPYI charges 0.68% a year (their other income funds are as high as 1.1%) whereas SPY charges just 0.09%. Seven times the cost to hold the same 500 companies.
The second flies under the radar more…
Because if you look carefully NEOS discloses in its own fund literature that distributions have been classified as a return of capital and may be made up of option premiums, dividends, capital gains and interest.
Meaning that a portion of that lovely 12% cheque arriving in your account is not profit at all. It is YOUR OWN MONEY being posted back to you.
Now, none of this is why Goldman wrote the cheque.
Of course Goldman didn't buy NEOS because SPYI beat the market.
Goldman bought NEOS because the money flowing into these income funds is growing at 70% a year, and because there is over $3 trillion sitting in retail money market funds looking for somewhere to go. So just another overpriced, underperforming product ready for your advisor to shill you (for yet another fee of course)
Which brings me to the point I made on that student call…
The strategy itself is not the problem…
The strategy is so obviously sound that the most sophisticated bank on Wall Street just spent $4.25B in a single year buying the companies that run it for retail investors.
Selling options on stocks you own… to generate cash while you wait… is a real and durable way to get paid from a portfolio.
The problem is the wrapper.
When you buy SPYI, you pay 0.68% a year to have the decision made mechanically, on someone else's calendar, on 500 companies at once, with no ability to skip a month when the numbers are bad or size up when they're good. And you get handed some of your own capital back with a nice label on it.
When you learn to do it yourself… you decide which companies you're willing to own, what price you're willing to own them at, and when the payment is worth taking.
Similar mechanism but a VERY different outcome.
That's what the Options Cashflow Accelerator teaches, and it's why I spent part of a student call taking apart a fund that Goldman Sachs valued at $2.25 billion just a few days later.
Oliver