-
TSLY’s high yield masks poor overall returns. Even excluding dividend reinvestments and taxes, the ETF simply returned less than half of owning Tesla shares.
-
Income spending can wipe out your nest egg. Investors who withdrew distributions instead of reinvesting them would have seen their principal decrease over time.
-
You pay a high fee for an inefficient structure. TSLY charges an expense ratio of 0.99% and distributes income taxed at ordinary rates, making this strategy both expensive and tax inefficient.
-
An analyst named NVIDIA just named his top 10 AI stocks in 2010. Get it for free here.
READ: The analyst named NVIDIA in 2010 Just naming his top 10 AI stocks
I will be very tired. Many retirees say they want income from their portfolios but refuse to sell stocks for yield. The idea is that spending dividends or distributions feels acceptable, while selling principal feels like running a portfolio.
This difference is mostly a mental calculation. What really matters is the full return. This means that the after-tax performance of the investment is reinvested with all distributions. If the total return of the strategy is not competitive with the underlying index benchmark, then the high yield will not help you. You simply pay the fund manager to package your money back to you as income.
There is no better example of this problem than in the category of very high yield ETFs that have attracted a wave of income-oriented investors. Today is an example YieldMax TSLA Options Income Strategy ETF (NYSEMKT:TSLY).
Through March 5, 2026, the ETF announces a distribution rate of 48.5%. For income-starved retirees, that number seems insurmountable. But yields tell only part of the story. In fact, investors who bought this ETF would historically do worse than someone who simply bought Tesla shares and sold a few shares each year to fund retirement income.
In the next section, we’ll go over the math of total returns using historical data. My goal is simple: show why focusing only on high yields can be misleading, and why total return should always be the metric that guides your decisions.
Using data from the backtesting platform testfolio.io, I compared TSLY Tesla Inc. (NASDAQ: TSLA ) for 3.28 years from November 23, 2022 to March 4, 2026.
Results are based on total returns before taxes, with all distributions reinvested. In other words, it gives TSLY the benefit of the doubt. We assume you reinvest any distributions and ignore the tax bill that most investors would actually face.
Looking primarily at TSLY, the ETF delivered a total return of 55.51% over the period. At first glance, it may not seem scary. However, this is a strategy built around generating income rather than maximizing price appreciation. If you had faithfully reinvested those big title yields and ignored taxes, that’s roughly the result you would have gotten.
But now compare that to simply holding Tesla shares. Meanwhile, Tesla produced a total return of 121.58%. No complex options are covered. No cover year strategy. No widely distributed yields. Just extend the storage. This means that an investor who simply owns Tesla will earn more than double the return of an investor who chooses TSLY!
But this is where mental arithmetic often comes into play. Some investors will say that Tesla doesn’t pay dividends, so they will need to sell shares to generate income. But it is perfectly fine and mathematically perfect.
Selling shares is simply another way to exchange total return for cash flow. In fact, even if you sold half of your Tesla and paid the investment tax to fund the exit, you would still come out ahead by holding the TSLY.
The picture gets even worse if you look at what happens when ETF distributions are actually spent instead of reinvested. If you had withdrawn payments from TSLY instead of reinvesting them, your principal would have decreased by 83.69% over the same period. What’s the point of collecting large distributions if your nest egg is constantly decreasing week by week?
We have already established that TSLY’s significant yield is steadily decreasing net asset value. This creates two major problems for investors.
-
First, even if you reinvested every distribution and ignored taxes, the strategy still gave less than half the return of owning Tesla shares over the same period.
-
Second, if you actually withdrew the distribution, your principal would have been significantly worse. Over time, this decline makes it difficult to maintain future income.
Think about what’s happening here: You’re paying YieldMax a dismal expense ratio of 0.99% to dilute the stock you’re holding, watch your capital steadily decline, and end up with worse long-term results than if you’d simply bought the shares yourself.
Moreover, the tax treatment is surprisingly inefficient. Many high-yield strategies distribute a portion of their payouts as returns of capital. This is essentially your money being returned to you, which reduces your cost basis but is not immediately taxable.
TSLY does not currently offer this benefit. The most recent dividend estimate as of March 4, 2026 is classified as 100% income and 0% return on capital. This means that the entire payment is likely to be treated as ordinary income and taxed at your marginal tax rate.
When you combine the decline in net assets, poor total returns, and fully taxable distributions, the value proposition becomes difficult to justify, which is why it’s so surprising to see how much money is flowing into the fund. Despite these shortcomings, investors have poured a total of about $941 million into TSLY!
If you see a double crop, take the time to dig deeper. Know where the yield comes from and what trade you accept in return. Because at the end of the day, all returns are whether your wealth actually grows.
Wall Street is pouring billions into AI, but many investors are buying the wrong stocks. The analyst who first identified NVIDIA as a buyback in 2010 — before its 28,000% run — has identified just 10 new AI companies that he believes can deliver returns beyond that point. One dominates the $100 billion equipment market. Bill addresses the single biggest obstacle to maintaining AI data centers. The third segment is a net play in the optical network market that is quadrupling. Most investors haven’t heard of half of these names. Get a free list of all 10 stocks here.
