I want to dive into 3 investment vehicles that I feel can really be beneficial when relying on income to retire early and live the dream — REX Shares ETFs.
Current macrotrends make these ideal if you want to increase your income and are willing to take on a little risk. These investments are all ETFs that do covered calls on stocks they hold in the fund to pay out juicy monthly dividends. All 3 focus on different trending sectors. They give you an opportunity to buy a basket of popular stocks and make income, something they don’t do individually.
If you’ve been with us before, you probably know how high I am on 2 of these REX Shares ETFs. If these are new to you, you’re in for an awesome investment opportunity.
Podcast
If reading isn’t your thing you can listen to episode 91 of our podcast here or on your favorite platform. It’s also available in video format.
**DISCLAIMER**
Ticker metrics change as markets and companies change, so always do your own research.
The content on this site is based on personal experience and is for educational purposes, not financial advice. See full disclaimer here.
Covered Calls
What Is A Covered Call
A covered call is an options-trading strategy where you own shares of a stock (the underlying asset) and sell (write) call options on that same stock.
Essentially, you’re giving someone else the right to buy your shares at a specific price (the strike price) by a certain date (the expiration date).
How Does A Covered Call Work
First You Need To Own The Underlying Stock
You need to own the shares to “cover” the call option you’re selling, because if the buyer of your call option exercises it, you’re obligated to sell your shares to them.
That’s why owning the stock you wish to write options on is crucial.
You Sell A Call Option
This means you receive a premium (a fee) for taking on the obligation that someone else wasn’t willing to do.
Things To Be Aware Of
You get the best results with covered calls when you have a neutral or slightly bullish market. So don’t do this yourself unless you expect the stock price to either stay relatively flat or rise moderately.
Be aware that there is limited upside potential. If the stock price rises significantly above the strike price, you’ll be obligated to sell your shares at the lower strike price, potentially missing out on further gains.
However they do have limited downside protection. The premium you receive from selling the call option acts as a buffer against potential losses if the stock price declines.
People make some serious money from doing options trading. I never got into it because I found funds that do all the work for me.
Benefits of a Covered Call Strategy
Income Generation
You earn the premium from selling the call option, which can provide additional income on top of any dividends you might receive from the stock.
Risk Management
The premium can help offset potential losses if the stock price falls.
Suitable For Neutral Or Slightly Bullish Markets
Covered calls can be profitable even if the stock price doesn’t move much or rises moderately.
Lower Risk Compared To Other Options Strategies
Because you own the underlying stock, you have some protection against potential losses.
In essence, a covered call is a way to generate income from your stock holdings while also limiting your risk and potentially benefiting from moderate price increases.
Got it? Good. Now on with the tickers.
REX Shares
#1 AIPI
What AIPI Is And Does
AIPI gives you exposure to leading AI firms within the BITA AI Leaders Select Index, providing a strategic approach to Artificial Intelligence. The index rebalances monthly and reconstituted quarterly.
BITA AI Leaders Select Index
For you nerds that need to know like me, this index is a rules-based composite index that tracks the market performance of companies, listed on recognized exchanges based in the US, that are at the forefront of AI technologies.
AIPI holds 25 of the best AI stocks the market has to offer, such as PLTR, CRWD, NVDA, ARM, META, AMZN, MSFT, plus others. AIPI writes covered calls on each of the stocks it holds and pays some nice monthly divies to its ETF holders.
This is huge since the stocks listed above don’t normally pay divies (or if they do, the divies are ca-ca).
AIPI is an actively managed exchange-traded fund (ETF) that seeks capital appreciation and current income while maintaining the opportunity for exposure to the share price (i.e., the price returns) of the securities of the companies comprising the Index.
AIPI’s Performance
AIPI was introduced in 06/2024 and since then has returned 16%. Most of these returns have been in the form of monthly divies ranging from $1.45 to $1.51 (7 total dividends paid for $10.34).
I really like this for 2 reasons. First, AI is going to be huge for the next few years. As an actively managed fund, they should be able to navigate any pitfalls, if there are any). And second, it currently yields 35%.
Again, as income investors we focus on cash, not paper gains, so I have no issues that there are upside limitations on covered calls.
#2 FEPI
What FEPI Is And Does
FEPI provides exposure to leading tech firms within the FANG & Innovation Index providing a strategic approach to big tech. The FANG & Innovation Index is equally weighted and includes 15 highly liquid stocks focused on building tomorrow’s technology today. The index rebalances monthly and reconstitutes quarterly.
FEPI holds about 7% of each of the following: PLTR, NFLX, META, CRM, AMZN, ADBE, MSFT, INTC, GOOGL, AAPL, AMD, TSLA, NVDA, MU and AVGO. Proceeds from call option sales on these stocks are invested in money market instruments to generate current monthly income.
FEPI’s Performance
FEPI was introduced in 10/2023 and has returned 26% since inception. FEPI has paid 15 divies ranging from $1.05 to $1.20, for a total of $15.69 in divies per share since inception.
There is some crossover with AIPI in the stocks held, but I am okay with that since, I expect big tech to keep humming along just like AI. FEPI currently yields 26%.
#3 CEPI
What CEPI Is And Does
CEPI provides exposure to companies that are actively engaged in crypto-related activities within the BITA Crypto Assets and Digital Payments Index. This provides a strategic approach to crypto investing.
BITA Crypto Assets and Digital Payments Index
This index is a rules-based composite index that tracks the market performance of 25 companies, listed on recognized exchanges based in the US, that are actively engaged in crypto-related activities such as cryptocurrency mining, trading, custody, blockchain technology development, and the creation of digital payment solutions.
Some of the stocks that CEPI holds are: HOOD, COIN, NU, V, MA, MSTR and TSM plus others. The Fund is an actively managed ETF that seeks capital appreciation and current income while maintaining the opportunity for exposure to the share price (i.e., the price returns) of the securities of the companies comprising the Index, subject to a potential reduction in returns in a rising market.
CEPI’s Performance
CEPI is new, introduced 12/2024 and has returned -7% in that timeframe. As I fully expect crypto to explode in 2025, I like this one a lot as well.
However, only one divie of $1.70 has been paid out in CEPI so far. It’s new so I need to make sure the dividend is consistent like AIPI and FEPI before I start a position in this one.
Our Experience With REX Shares
We hold FEPI and AIPI in our portfolio, but CEPI hasn’t been out long enough for us to take on the risk of owning it yet. If it performs like the other 2, it will be an easy decision.
FEPI’s Results
We bought FEPI 05/2024 for $53.72 and have collected $9.93 in divies so far. Our total return in FEPI is 13% because we bought it much higher than the band that it’s been trading in. This return isn’t the best, but it should increase the more we DRIP at the lower price.
Once we get on the road in a few months, we’ll be collecting $90 a month just in FEPI alone.
AIPI’s Results
We bought AIPI 11/2024 for $50.46 and have collected $2.94 in divies so far. Our total return in AIPI is 5%. We’re also DRIPing this until we hit the road and we’ll be getting about $119 a month.
We invested $8,000 (7.5% of our total portfolio) total into FEPI and AIPI ($4,000 into each ETF) and we will be making $210 (14%) of our required $1,500 to live in the Van from just these two ETFs. Pretty sick, right?
To Sum It Up
I firmly believe with just FEPI, AIPI, USOY, YMAX, CONY and NVDY we’ll be able to fully fund our future travel (retirement) lifestyle with only $40,000 invested equally into each.
That will only make up 30% of our total portfolio leaving the remaining 70% to continue to compound and grow for future endeavors and bonus fun. That’s how we plan to mitigate the risks and still get to enjoy life.
This shows that if you get creative and take a little risk with REX Shares or other kinds of funds, you can secure your finances and retire way earlier than anticipated.
I’m not suggesting that you put all your money into these riskier assets, but if you put 25%-33% of your portfolio into them, it can catapult your earnings and get you to your goals faster. Financial independence doesn’t have to be a pipe dream.
