Investment Glossary

Barbell Strategy

A portfolio allocation approach that combines very safe, stable holdings (the "protective shell") with higher-risk, higher-yield positions (the "reactive core"), avoiding the middle ground.

OppenFolio uses a 75% shell / 25% core barbell design. The shell provides stability and consistent income, while the core provides higher yield and experimentation.

Example: 75% in PFFA, JAAA, VRP (stable) + 25% in TSLY, ULTY (volatile) = barbell portfolio

Reactor Model (OppenFolio Specific)

OppenFolio's metaphorical framework comparing the portfolio to a contained reactor:

• Protective Shell: Stable, lower-volatility ETFs that contain risk (75%)
• Reactive Core: High-yield, volatile "fuel" that generates excess income (25%)
• Containment Design: Structure ensures drawdowns stay manageable

The goal is to extract more energy (income) than is lost to heat (NAV decay).

Conservative Mode

A viewing mode on OppenFolio that shows only the stable, lower-volatility holdings (protective shell + moderate positions like JEPI/JEPQ). Excludes the most aggressive NAV-decaying positions.

Default mode to provide responsible presentation of financial information—showing the stable foundation first before the experimental volatile holdings.

Complete Mode

A viewing mode that shows the full OppenFolio portfolio including all high-risk, high-yield positions such as ULTY, NVDY, TSLY, and other NAV-decaying ETFs.

Toggle between modes using the button on the homepage to see the difference between stable holdings and full experimental portfolio.

NAV Decay

The gradual erosion of an ETF's Net Asset Value (price per share) over time, common in covered call and high-yield strategies.

NAV decay occurs when ETFs distribute more in dividends than they generate in sustainable returns, causing the share price to decline even as investors receive income.

Example: A $10 ETF pays $0.15/month ($1.80/year = 18% yield) but declines to $8.50 over one year. You collected $1.80 but lost $1.50 in value = +$0.30 net (+3%).

Key insight: High yield doesn't always mean high total return when NAV decay is considered.

Covered Call

An options strategy where the fund owns underlying stocks and sells call options against those positions to generate additional income.

The premium from selling calls provides extra yield but caps upside potential if the stock rises significantly. If the stock price rises above the strike price, the shares get "called away" at that strike price.

Used by: JEPI, JEPQ, DIVO, and most JPMorgan equity premium income ETFs

Synthetic Exposure

Using derivatives (options, futures, swaps) to gain exposure to an asset's price movements without owning the underlying asset directly.

YieldMax ETFs use synthetic exposure via call and put options to track individual stocks (e.g., TSLY tracks Tesla) while generating income from option premiums.

Risk: Synthetic positions may not perfectly track the underlying and carry counterparty risk.

Options Premium

The price paid by an options buyer to an options seller for the right (but not obligation) to buy or sell an asset at a specific price.

High-yield ETFs generate income by selling options and collecting these premiums. This premium income is distributed to shareholders as dividends.

Higher volatility = higher premiums = higher potential yield (but also higher risk)

Expense Ratio

The annual fee charged by an ETF, expressed as a percentage of assets. A 0.50% expense ratio means you pay $5/year per $1,000 invested.

OppenFolio range:

• Low: JAAA (0.20%), VRP (0.30%)
• Medium: JEPI (0.35%), PFFA (0.45%)
• High: YieldMax ETFs (0.99%), TSLY, ULTY, NVDY

Higher expenses reduce your net returns, but may be justified if the strategy generates significantly higher income.

Yield on Cost (YOC)

The annual dividend income expressed as a percentage of your original investment cost, not the current market value.

A position bought for $1,000 that now generates $150/year in dividends has a 15% yield on cost, regardless of whether the current market value is $900 or $1,100.

YOC is especially relevant for high-yield strategies where NAV decay reduces market value but income may remain stable or grow.

Distribution Yield

The most recent distribution (dividend payment) annualized and divided by the current share price. This is the "headline yield" most ETF providers advertise.

Calculation: (Last monthly distribution × 12) / Current price

Warning: Distribution yield can be misleading if distributions are declining or unsustainable. Always check the trend over 6-12 months.

SEC Yield

A standardized yield calculation mandated by the SEC that attempts to show the "true" yield after expenses, based on the fund's actual income over the past 30 days.

SEC yield is often lower than distribution yield for high-yield ETFs because it excludes unsustainable distributions like return of capital.

More conservative and realistic metric than advertised distribution yield.

Decay-Aware Yield (OppenFolio Specific)

A custom metric that adjusts the forward yield by subtracting estimated NAV decay percentage.

Formula: Decay-Aware Yield = Total Yield % - NAV Decay %

Example: 15% yield - 12% NAV decay = 3% decay-aware yield

This provides a more realistic view of actual returns when holding NAV-decaying positions.

Monthly Dividend

ETFs that distribute dividends every month rather than quarterly or annually. Provides more consistent cash flow for income-focused investors.

Monthly payers in OppenFolio: JEPI, JEPQ, TSLY, ULTY, NVDY, YMAX, CONY, PFFA, and most YieldMax ETFs

Benefit: Easier budgeting and reinvestment, smoother cash flow

JEPI (JPMorgan Equity Premium Income ETF)

A covered call ETF that holds large-cap US stocks and sells call options to generate monthly income. Part of OppenFolio's protective shell.

Target yield: 7-9% annually
Expense ratio: 0.35%
Risk profile: Moderate - lower volatility than S&P 500

JEPI is designed for income with some capital appreciation, making it suitable for conservative investors seeking monthly dividends.

JEPQ (JPMorgan Nasdaq Equity Premium Income ETF)

Similar to JEPI but focuses on Nasdaq-100 stocks (tech-heavy). Slightly higher yield and volatility than JEPI.

Target yield: 9-11% annually
Expense ratio: 0.35%
Risk profile: Moderate-high - tech sector concentration

In Conservative mode, JEPQ is classified as "Core" rather than "Shell" due to higher volatility.

TSLY (YieldMax TSLA Option Income Strategy ETF)

A YieldMax ETF providing synthetic exposure to Tesla (TSLA) via options while generating high income from option premiums.

Target yield: 40-70% annually (highly variable)
Expense ratio: 0.99%
Risk profile: Very high - significant NAV decay, high volatility

Warning: TSLY experiences severe NAV decay. Suitable only for income-focused investors who accept principal erosion.

ULTY (YieldMax ULTA Option Income Strategy ETF)

YieldMax ETF tracking Ulta Beauty (ULTA) with high-yield option income strategy.

Target yield: 50-80% annually (highly variable)
Expense ratio: 0.99%
Risk profile: Very high - NAV decay, concentrated exposure

Part of OppenFolio's reactive core, rotated based on yield efficiency scores.

PFFA (Virtus InfraCap US Preferred Stock ETF)

Invests in US preferred stocks, providing stable monthly income with lower volatility than common stocks.

Target yield: 6-8% annually
Expense ratio: 0.45%
Risk profile: Low-moderate - interest rate sensitive

Core holding in OppenFolio's protective shell, providing consistent income.

JAAA (Janus Henderson AAA CLO ETF)

Invests in AAA-rated Collateralized Loan Obligations (CLOs), providing stable income with very low credit risk.

Target yield: 5-6% annually
Expense ratio: 0.20%
Risk profile: Low - AAA rating, low volatility

Part of the protective shell, designed for stability and consistent distributions.

VRP (Invesco Variable Rate Preferred ETF)

Invests in variable rate preferred stocks that adjust with interest rates, providing some inflation protection.

Target yield: 5-7% annually
Expense ratio: 0.30%
Risk profile: Low-moderate - interest rate hedge

Shell holding that helps protect against rising rates.

YieldMax ETFs (General)

A family of single-stock option income ETFs that use synthetic exposure to individual stocks (Tesla, Nvidia, Coinbase, etc.) to generate extremely high yields.

Common symbols: TSLY, NVDY, CONY, MSTY, AIYY, AMZY

Strategy: Sell call and put options on the underlying stock to generate premium income

Risk: Severe NAV decay (often 30-50% annually), high volatility, concentration risk

Use case: Experimental "fuel" in reactor core for maximum income extraction

Volatility

The degree of price fluctuation in an investment, typically measured by standard deviation of returns. Higher volatility = larger price swings.

OppenFolio context:

• Low volatility: JAAA, TFLO (~5-10% annual swings)
• Moderate: JEPI, PFFA (~10-15% swings)
• High: YieldMax ETFs (~30-50%+ swings)

The barbell strategy uses low-volatility shell to contain high-volatility core.

Drawdown

The peak-to-trough decline in portfolio value, expressed as a percentage. A portfolio that falls from $100,000 to $85,000 experiences a 15% drawdown.

OppenFolio result (April 2025 tech pullback):

• Core positions: -30% to -40% drawdown
• Total portfolio: -12% drawdown

The protective shell design limited total portfolio drawdown despite severe core declines.

Concentration Risk

Risk from holding too much of your portfolio in a single asset, sector, or strategy. If that holding fails, the portfolio suffers significant damage.

OppenFolio approach: Diversify within the shell (preferred stocks, CLOs, variable rate) but accept concentration risk in the core (covered call/options strategies) as an intentional tradeoff for higher yield.

Yield Efficiency Score (YES)

OppenFolio's proprietary metric that adjusts dividend yield for NAV decay and volatility to identify the most "efficient" income producers.

Higher score = better income relative to risk and decay

Used to determine which positions to add, hold, or rotate out of the reactive core.