What to Avoid — The Do Not Buy List · Reference

What You'll Learn

This is the most important lesson in the Reference section. Not because the workflow doesn't matter — it does. But because the single most expensive mistake a new Blueprint steward can make is buying an ETF that's quietly destroying itself, attracted by a yield number that isn't really a yield at all.

This lesson covers:

The truth about NAV erosion — not all of it is bad. The difference between acceptable drift and destructive erosion.
The 5 categories of ETFs to avoid in The Blueprint.
The named tickers that show up repeatedly — with actual NAV decline numbers.
The replacement principle that lets you keep the strategy without the destruction.

Building On What You Already Learned

This lesson assumes you've completed:

Where to Look — Your Research Stack — Reference Lesson 1

What to Look For — The 5-Minute Check — Reference Lesson 2

The Four Criteria — Step 3, Lesson 5

First, the Truth About NAV Erosion

Most people are taught one of two things about NAV erosion, and both are wrong.

Wrong take #1: "NAV erosion is always bad — avoid any fund that has any."
Wrong take #2: "NAV erosion doesn't matter as long as the yield is high enough."

The truth is in between. There are two completely different kinds of NAV drift. They look similar on the surface, but they mean very different things. If you don't know the difference, you'll either avoid funds that are fine, or buy funds that are quietly hollowing you out.

Let's fix that.

What Is NAV?

NAV = Net Asset Value = the price per share of the fund. It's what your shares are actually worth right now.

NAV erosion = when a fund pays out more in distributions than it's actually earning internally, so the share price slowly drops over time. The fund is, in effect, paying you partly with your own money.

But that statement alone doesn't tell you whether it's bad. The question is: how does the drift compare to the income you receive?

Acceptable Drift vs. Destructive Erosion

Imagine $10,000 in two different funds, held for one year.

Starting investment: $10,000
Distributions received over the year: $1,200 (~12% yield)
Share price drifts down 2% — shares now worth $9,800
Ending position: $9,800 in shares + $1,200 cash = $11,000

Real $1,000 gain. ~10% return.

Starting investment: $10,000
Distributions received over the year: $6,000 (~60% yield — exactly what was advertised)
Share price drops 60% — shares now worth $4,000
Ending position: $4,000 in shares + $6,000 cash = $10,000

Break-even before taxes. Loss after taxes.

The drift was real on the left. The distributions were bigger. Net positive — that's the trade you're making on purpose. Give up some price appreciation, get high monthly income.

On the right? The headline yield was 60%. The actual return was zero. The fund didn't make you any money — it just returned your own principal in installments and made you pay taxes on it.

The Simple Test

Whenever you're evaluating a high-yield ETF, ask one question:

Are the distributions bigger than the price drop, or smaller?

Scenario	Diagnosis
Distributions bigger than the price drop	✅ Acceptable drift — the fund is genuinely making money for you
Distributions roughly equal to the price drop	⚠️ Break-even at best — likely a loss after taxes
Distributions smaller than the price drop	❌ Destructive erosion — you're being paid with your own money

Mild drift on a diversified, index-based covered call ETF? Normal and expected.

Steep decline on a single-stock covered call ETF that wipes out the distributions? Avoid completely.

Now you know NAV erosion. Now we can talk about what specifically to avoid.

Category 1

Single-Stock Covered Call ETFs

This is where destructive NAV erosion lives. Named tickers, with actual measured NAV decline:

Ticker	Underlying	Approx. NAV Decline
TSLY	Tesla	~79%
NVDY	Nvidia	~69%
PLTY	Palantir	~87% (worst in category)
YBIT	Bitcoin	~63%
ULTY	Ultra-yield strategy	Significant erosion

Why they all fail: The strategy depends on the underlying staying within a reasonable price range. When you write covered calls on a single highly-volatile stock, big up moves get capped — you don't get the upside. Big down moves still hit you fully. Over time the math is one-directional. The fund cannot recover.

The Replacement Principle

Multi-stock basket strategies run the same options strategy on a diversified basket of stocks. The internal diversification is what makes the strategy sustainable.

Same strategy. Different underlying.

Single-stock = destroys NAV ❌
Multi-stock = preserves NAV ✅

Use these instead: YMAG, YMAX, QQQI, JEPQ, JEPI, SPYI, FEPI

Category 2

Leveraged or Inverse ETFs

Funds with 2x or 3x leverage, or that move opposite the market.

Examples: TQQQ, SQQQ, SPXL, SPXS, UVXY, SVXY

Why they fail:

Designed for short-term trading, not for holding
Rebalance daily, causing long-term decay regardless of direction
Almost always fail the M1 Margin Requirement check (typically 100%)

Double-disqualified. No place in The Blueprint.

Category 3

Quarterly or Annual Payers

The Blueprint runs on a monthly rhythm. Your Money Date, your Sweep account, your margin paydown — all monthly. Anything paying less than monthly leaves gaps in the system.

Some of these are perfectly fine investments in other contexts — they just aren't Blueprint compatible. If you find one you love, own it somewhere else. Not in your Blueprint pies.

Category 4

High-Correlation Equity ETFs Masquerading as Income

Funds with names containing "high yield" or "income" but whose underlying holdings are concentrated in a few high-yielding stocks that move almost exactly with the broader market.

The signature: S&P 500 correlation above 0.85.

These give you stock market risk with a slightly higher dividend — which is not what Foundation needs (correlation too high) and not what Accelerator needs (yield not high enough to justify the volatility).

The Four Criteria check from Step 3 catches these. Correlation matters, and these funds fail it.

Category 5

Funds With Less Than 12 Months of Track Record

The Blueprint isn't anti-new-fund as a rule. But a fund that's existed for less than a year:

Hasn't been through enough market conditions to show how it actually behaves
Has no real two-year price chart to evaluate
Has barely any distribution history

You'd be guessing. Wait. Let it season. If it's still looking good in 12–18 months, evaluate it then with the full workflow.

Three Clarifying Notes

1. The Do Not Buy List Is Not a Moral Judgment on These Funds

Some have legitimate uses. TQQQ is fine for day-traders. TSLY might be a reasonable speculation for someone betting on Tesla's volatility. The Do Not Buy list is specifically about The Blueprint — these funds don't fit the system we're building. Other systems, other strategies, other goals — different conversation. We're not saying these funds shouldn't exist. We're saying they don't go in your pie.

2. The Named Tickers Will Change. The Principle Is Permanent.

Single-stock covered call ETFs are a hot product category. New ones come out all the time — APLY, MSFY, AMZY, and whatever launches next month. The principle is what's permanent:

Single-stock covered call ETF = destructive NAV erosion = do not buy.

Apply the principle to any new ticker you see. They will follow the same pattern.

3. When a Fund Fails the Workflow, Walk Away.

Don't talk yourself into it because of the yield. Don't make exceptions because of a friend's recommendation. Don't reason your way into "well it's only 79% down, but it's recovering."

The workflow is your protection. Trust it.

Quick Reference — The Do Not Buy List at a Glance

❌ Single-Stock CC ETFs → TSLY, NVDY, PLTY, YBIT, ULTY (and any new ones)

❌ Leveraged / Inverse → TQQQ, SQQQ, SPXL, SPXS, UVXY, SVXY

❌ Non-Monthly Payers → Quarterly and annual distributions

❌ High-Correlation "Income" → S&P correlation above 0.85

❌ Under 12 Months Old → Not enough track record

✅ Multi-Stock Basket CC → YMAG, YMAX, QQQI, JEPQ, JEPI, SPYI, FEPI

What Does NOT Belong in Your Decision-Making

Yield FOMO. Forty, fifty, eighty percent yields are flashing red, not green. Run the NAV erosion test before anything else.
Hot ticker recommendations. A friend, a YouTuber, or a Reddit thread loving a fund is not a substitute for the workflow.
"It'll come back." A fund that's dropped 79% needs to gain ~376% just to break even. That's not a comeback — that's a miracle.
Making exceptions for one fund. The categories aren't arbitrary. They exist because the math doesn't work, the rhythm doesn't work, or the structure doesn't fit. One exception today becomes three exceptions next year, and your portfolio drifts away from The Blueprint.

You're Ready

Three lessons. Three skills.

Lesson 1 — Where to look: the seven-tool research stack.
Lesson 2 — What to look for: the five-minute workflow.
Lesson 3 — What to avoid: the Do Not Buy list and the truth about NAV erosion.

You now have what you need to make your own decisions. Independently. With confidence. Without hype, without guesswork, without trusting somebody else to tell you what to buy.

That is the steward's posture. Learn the tools. Use them honestly. Walk away from what fails the test. Build patiently with what passes.

The faithful steward doesn't just earn. He protects.

Protect what you've been given. Choose carefully what goes in your pie.