I will be coming into roughly 500K to deploy from a pending real estate sale.
I would like to use this money to augment cash flow in the next 2-5 years and am looking at either QQQI or VOO to do this. Seems like most would say VOO for growth. Looking at the VOO chart it seems the investment doubles every 5-7 years. However, in looking at QQQI and and crunching the numbers on a compound interest calculator, if I invest all of the money in QQQI and drip the investment for 5 years, my investment would be worth roughly $992,000.
Seems QQQI might better as an investment vehicle as it would also double in 5 years and already be producing the income I initially want it for. Whereas VOO would take slightly longer then 5 years to double, and a conversion from the growth vehicle to the investment vehicle would trigger a taxable event.
What am I missing here? Is there any other reason why would VOO be superior to QQQI in this situation?
VOO vs: QQQI. What am I missing?
byu/AlarmedCombination57 instocks
Posted by AlarmedCombination57
9 Comments
You should do a little more research, specifically check out r/dividends. You will experience tax drag and possibly some nav erosion. Because of what qqqi is (covered calls fund) it will not do as well in a strong bull market. Also, voo is the sp500 and qqqi is a derivative of qqq, so completely different types of underlying (theoretically, at least). Finally, in an extended besr market, CC funds are untested, so who knows what happens. Also may wanna check out jepq or gpiq for a bit more established funds. Spyi, jepi, and gpix for cc funds based on the sp500.
Edit to add: i hold all funds ive mentioned, so there can be reasons someone would do this
You should do 250k in each and report back in 5 years!
A lot depends on your age.
VOO for longer term growth – if you’re far from retirement.
QQQI if you’re retired and need to live on the funds that the investment will toss off.
Just keep in mind that neither of the 2 is risk-free.
QQQI sells covered calls to generate distributions. It’s very different than a company which pays dividends from profits.
What is a covered call? It means you own the underlying stock (it’s “covered”), or in this case the QQQ ETF, and then you sell a buyer the rights to future gains, in return for upfront cash today, the options premium. Your options premium is set at current market value, but future gains have limitless potential – or in other words, you might collect a $1 today and that’s it, but the buyer of your option has potential to gain $2, $5, $10, $20.
Why this is important is QQQI has limited upside gains, but has no downside protection. When QQQ goes down by 10%, your QQQI NAV goes down by 10%. But when QQQ goes up 10%, QQQI will just get a small fraction of that (in theory if QQQ goes up very slowly and below call strike price, QQQI could capture all upsdie – but odds of this happening long term is about zero).
I’m not going to lookup exact numbers, but from my memory, QQQ was up about 25% in 2024 and about 20% in 2025. QQQI debuted in FEB 2024, so not quite the full stretch of 2024-2025. However, QQQI NAV only gained about 5% during that near 2 year stretch. Why such different results? Because all the upside gains were sold off in return for the immediate options premium.
But if you calculate out the distributions, and even better DRIP it, it doesn’t look so bad for QQQI compared to QQQ in total return.
Let’s look back to QQQ gains – 25% and 20%. Those are both over the historical average yearly return for QQQ. So what happens when QQQ has more muted years, or even worse, negative ones? QQQI will surely lose NAV. It looks “great” today because QQQ had 2 overperformant years. It won’t look so great when it has 2 underperforming years.
When QQQI loses NAV, it means the amount of underlying QQQ it holds is going to be less (this is very different than holding QQQ and riding out the ups and downs – you’re losing cash to buy the equity rather than just owning the equity). Holding less underlying means your options premium and distribution amounts will be a smaller nominal amount, despite the yield likely remaining in the same high band of 13-14%.
VOO is considered safe because you own shares in companies that have trended up over time. When the shares increase in value, you own every single cent of those gains. Let’s say hypothetically VOO goes from $500 to $300 and the back to $750; the entire recovery is yours.
QQQI is considered risky because it has no downside protection, yet the upside/recovery is capped. So you’re banking on the options premium outweighting the “losses” or “missing chunks” of recovery increment that you sold off. In the short term, it seems reasonable. But as you stretch out the timeline well odds are you’re going to lose a sliver here and a sliver there. If 25% and 20% underlying (which compounds to 50%) only gets you 5% NAV gain, I think it’s fair to say long term NAV is flat or negative and nominal distributions have little chance to grow over time, and more likely declining.
Disclosure: I own both VOO and QQQI. My QQQI is meant strictly for income. I view it as always better than HYSA return, even in the long run, and I need/want the income today. If you don’t want income today, and want growth no way do I suggest QQQI.
Fun fact – SCHD yields 3.5-4%. Over past 10 years, it has roughly gone from $12 to over $30 and distributions went from $0.40/share to over $1/share. That puts the returns for each at over 150%. It also means your yield on cost is over 8%. If time is on your side, SCHD will beat (crush really) QQQI in the long run with both capital appreication and yield on cost.
EDIT TO ADD: The right answer is usually a mix to meet your investment objectives. I own some amount of VOO QQQM (instead of QQQ) QQQI and SCHD; it doesn’t have to be all or nothing – but just know what you are buying.
>What am I missing?
that you’re comparing an ETF that has existed for 16 years against one that has existed for 2.
you don’t have enough datapoints to really gauge how qqqi will perform over the course of 5-7 years because it hasn’t existed that long (and therefor hasn’t been exposed to many market conditions yet that will impact how it holds up). like, when we had the inflation crisis in 2022/2023 it literally didn’t exist.
you can compare it against other covered call etf’s to get an idea of what to expect, but it isn’t going paint the picture you want to see.
QQQI hasn’t even been out for 5 years, those returns are not guaranteed. In fact your taking taking the returns for QQQI in one of the best markets to be doing a covered call strategy.
VOO prob will win long term.
You are missing that they (the ETF fund provider) is selling covered calls to pay you income.
They are charging you fees – and eroding the QQQ underlying and you will “triggering a taxable event” every month when they send you distribution/dividend/ whatever you want to call it.
You would be better off to buy 100+ shares of QQQ or VOO or VTI and sell the covered calls your self and avoid the fees.
Or just own the shares and hold. In 5-7 years when you need income sell a share or two every time you need (xx) dollars.
When you’re talking about investing and saying that your money *will* double in 5-7 years, it’s clear your assessment of risk and understanding of historical returns are woefully lacking. That’s not a given.
Tax. Qqqi dividends are taxable as income, voo as capital gains.