BUCK ETF

As clients inquire about next year's income, I recommend three favorite income funds to include in their portfolios. These funds are designed to generate reliable income and are primarily non-equity based, offering diversification. The funds have been selected based on their performance, stability, and potential to provide consistent returns.

Treasury Bill yields have been declining due to anticipated interest rate cuts, prompting investors to seek alternatives to money market funds. BUCK's strategy leverages high demand for Treasury options to generate additional income, focusing on convexity risk over credit risk. Investors seeking a cash alternative with higher total returns and minimal credit risk should consider BUCK, despite accepting some volatility.

BUCK's option writing strategy has not consistently outperformed U.S. treasuries, despite the higher volatility and risk. The fund's NAV decline and tie to SVOL raise concerns about its long-term viability and investor interest. Consider alternatives like covered call equities for similar yields and higher total returns or U.S. treasuries and CSHI for lower volatility.

The BUCK ETF is marketed as a cash replacement tool. It writes options on interest rate indices and bond futures to boost treasury returns. BUCK's 1-year total return of 6.3% is comparable to JPST but it exhibits higher price volatility than comparable cash replacement funds. I personally prefer JPST and JAAA's modest credit exposures, as credit markets are relatively easier to monitor.

BUCK ETF seeks to boost the yield on short-term treasuries through option strategies. The fund uses a combination of treasury bills and options on bond futures. BUCK has underperformed peers like SGOV (simple treasury ETF) over the past year. While lower risk, BUCK's option plays haven't delivered positive net results.

Simplify launched the Simplify Stable Income ETF in October 2022, and it has performed well since then. Its yield outpaces T-Bills, and its risk is not much higher, presenting it favorably over T-Bills alone. The Simplify Stable Income ETF offers a lower risk option compared to the Simplify Enhanced Income ETF, making it far more appealing for conservative investors.