As the S&P 500 catches its breath after reaching new highs, it’s an ideal time to get “Magnificent Seven” exposure amid the price dips. When you add tax-efficient income to the equation, you get an ideal scenario that also benefits fixed income investors with the actively managed NEOS S&P 500 High Income ETF (SPYI).
Fueled by strong earnings and the expectation of rate cuts, Magnificent Seven names like Nvidia, Microsoft, and Apple have been benefiting from the most recent S&P rally. Rising yield and inflation worries may be adding speed bumps, but the group has largely kept its momentum intact thanks to the centralized theme of artificial intelligence (AI).
“That strong performance begs a question: just how much higher can the Magnificent 7 rise? No one knows exactly how high but it’s certain that artificial intelligence (AI) will be the defining factor,” Investor Place posits.
SPYI provides exposure to the S&P 500 Index via implementing a data-driven call option strategy. With its active management strategy, SPYI can allow for tailor-made holdings of the aforementioned Magnificent Seven and other stocks as parts of its holdings. This allows the fund to be flexible under various market conditions, irrespective of how the markets react to news.
The experienced portfolio managers can tailor the positions in the fund to suit current market conditions and/or use a call-laddering strategy, allowing risk mitigation to the downside and the ability to capitalize on any upside when the S&P 500 trends higher.
Tax-Efficient Income
With the tax deadline just around the corner, it’s a reminder for investors who want to minimize their tax burden when the 2025 deadline rolls around. SPYI offers investors this tax-efficiency component to help mitigate capital gains. Since SPX Index options are classified as section 1256 contracts, they are subject to lower 60/40 tax rates.
SPYI offers a single solution, as opposed to investors handpicking holdings themselves to build a core equity portfolio. The active management also removes the guesswork and constant supervision of one’s own portfolio.
As the fund’s fact sheet points out, SPYI can be used as an alternative to existing core equity allocations to realize this tax-efficient monthly income stream. At the same time, SPYI is able to capture upside when the broad market trends higher, particularly the S&P 500, as it’s top heavy in Magnificent Seven names.
That tax-efficient monthly income component is a prime feature of not only SPYI, but other NEOS funds. To get a glimpse of its full ETF product suite, click here.
For more news, information, and analysis, visit the Tax-Efficient Income Channel.