What does 'Derivative Income' mean for IWMI and SPYI?

Both IWMI and SPYI fall under the Derivative Income category. This means they use financial contracts, such as options, to generate additional income, rather than relying solely on dividends from underlying stocks. This strategy allows them to report high yields. However, it can introduce complexity and tracking errors compared to traditional index funds. Beginners should understand that this income is engineered through derivatives, which may behave differently from natural stock dividends during volatile markets, affecting the fund's overall performance and distribution sustainability.

Why is IWMI's primary holding VTWO?

IWMI's top holding is VTWO, which represents 99.49% of its portfolio. VTWO is likely an ETF tracking the Russell 2000 index, aligning with IWMI's focus on small-cap stocks. The NEOS structure often uses a core holding to gain market exposure efficiently while implementing derivative strategies separately. This transparent single-holding structure makes it easy to see that IWMI's core market exposure is indirect through another fund. This differs from SPYI, which lists specific large-cap stocks as its top holdings, offering more direct visibility into individual company exposure.

How do the expense ratios of IWMI and SPYI compare?

Both IWMI and SPYI share an identical expense ratio of 0.68%. While this is considered high compared to standard passive index-tracking ETFs, it reflects the cost of managing the active derivative strategies used to generate income. When comparing fees, investors should note that a 0.68% fee reduces net returns annually. Although the fee is the same, the value depends on whether the derivative strategy adds sufficient income to justify the cost relative to a lower-cost alternative. The percentage points are equal, so the cost burden is identical in terms of assets deducted each year.

Which fund provides more trading liquidity?

SPYI generally offers better trading liquidity due to its substantially larger size, with $12.1 billion in net assets. IWMI is smaller, holding $1.3 billion in net assets. Larger funds typically have tighter bid-ask spreads and higher daily trading volumes, making it easier for investors to buy or sell shares without significantly impacting the price. While IWMI's $1.3 billion is still considerable, the significant size difference means SPYI's $12.1 billion base likely provides more market depth, which can be an important practical factor for larger transactions or frequent trading activities.

Do IWMI and SPYI hold the same stocks?

No, IWMI and SPYI do not share any top-10 holdings. IWMI primarily holds VTWO, which tracks small-cap stocks, whereas SPYI's top holdings include large-cap companies like NVDA, AAPL, and MSFT. This lack of overlap confirms they target distinct market segments. While SPYI offers direct exposure to major technology and consumer stocks, IWMI provides indirect exposure to the Russell 2000 via its primary holding. Investors should expect different underlying asset risks and drivers, as small-cap and large-cap companies often perform differently across various economic cycles.

Which fund is better suited for small-cap exposure?

IWMI is better suited for small-cap exposure because it tracks the Russell 2000 index, as indicated by its full name and its primary holding of VTWO. SPYI tracks the S&P 500, which consists of large-cap companies. Small-cap stocks often have higher growth potential but also higher volatility compared to large-caps. If an investor's goal is specifically to gain exposure to smaller, domestic US companies, IWMI aligns with that objective. SPYI, conversely, provides exposure to established, larger corporations, representing a fundamentally different segment of the equity market.

What is the difference in inception dates?

SPYI was launched on 30 August 2022, while IWMI was launched on 25 June 2024. This means SPYI has a longer operational history, allowing investors to evaluate its performance through more market cycles. IWMI is very new, with a short track record, making it harder to assess how its derivative strategy performs over time. The lack of historical data for IWMI represents a risk for beginners who rely on past performance patterns. SPYI's additional two years of data provides slightly more context for analysing income consistency and volatility, although neither fund has a decade-long history.

How do the dividend yields compare?

IWMI reports a higher dividend yield of 14.36%, compared to SPYI's 11.79%. Both yields are significantly above traditional equity funds, driven by their derivative income strategies. It is important to understand that a higher yield does not always mean better returns; it may reflect higher risk or the mechanics of option premiums. Beginners should note that these yields fluctuate based on market volatility and option pricing. The 2.57 percentage point difference is notable, but the sustainability of the higher yield in IWMI is harder to judge due to its shorter history and smaller asset base.

Why are sector weights unavailable for both funds?

Sector weights are listed as 'not available' for both IWMI and SPYI in the provided data. This can limit transparency for investors trying to assess diversification. Without sector data, it is difficult to identify if a fund is overly concentrated in specific industries like technology or financials. For SPYI, one can infer heavy tech exposure from top holdings like NVDA and AAPL. For IWMI, the reliance on VTWO suggests broad small-cap exposure, but specific sector risks remain hidden. Investors should be aware that incomplete data requires more caution when evaluating portfolio concentration risks.

Which fund suits an investor seeking large-cap exposure?

SPYI is the appropriate choice for investors seeking large-cap exposure, as it is designed to track the S&P 500 index. Its top holdings, including NVIDIA, Apple, and Microsoft, are characteristic of this index. These companies represent the largest US firms by market capitalisation. IWMI, by contrast, focuses on the Russell 2000, targeting small-cap companies. Therefore, if the goal is to benefit from the stability and growth of established major corporations, SPYI's structure aligns with that objective. The fund's size and holdings directly reflect this large-cap orientation, differing significantly from IWMI's small-cap focus.

IWMI vs SPYI

Two funds, one decision: we compare cost, performance and what each ETF actually holds in September 2026.

Compare NEOS RUSSELL 2000 High Income ETF (IWMI) and NEOS S&P 500 High Income ETF (SPYI). Review fees, holdings, dividends, and how each tracks its market, including small-cap versus large-cap exposure. Educational content, not financial advice.

Fund Snapshot

Key Fund Metrics

IWMI

Metric

SPYI

0.68%

Expense Ratio

0.68%

14.36%

Dividend Yield

11.79%

$1.28B

Net Assets

$12.13B

Holdings

511

Jun 25, 2024

Inception Date

Aug 30, 2022

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Index Tracked

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Derivative Income

Fund Category

Derivative Income

Both funds charge the same annual fee.

Shared Top Holdings

These funds do not share any of their top holdings.

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Investment Analysis

IWMI

Pros

IWMI provides a high 14.36% dividend yield that may suit income-focused investors.
With $1.3 billion in net assets, IWMI offers reasonable liquidity for its fund size.
IWMI maintains transparency by listing VTWO as its single primary holding, representing 99.49%.

Considerations

IWMI’s 0.68% expense ratio is relatively high compared to standard index-tracking ETFs.
IWMI lacks sector weight data, limiting visibility into potential concentration or diversification risks.
Inception in June 2024 means IWMI has a very short performance track record to evaluate.

SPYI

Pros

SPYI benefits from substantial $12.1 billion in net assets, suggesting strong trading liquidity.
SPYI’s diversified holdings include major equities such as NVDA and AAPL across sectors.
A 11.79% dividend yield provides consistent income for investors seeking cash flow.

Considerations

SPYI’s 0.68% expense ratio is considerably higher than traditional passive index funds.
SPYI lacks detailed sector weights, making it difficult to assess sector exposure accurately.
SPYI’s reliance on derivative income strategies may entail complexity and potential tracking errors.

About IWMI and SPYI

IWMI (IWMI)

The NEOS RUSSELL 2000 High Income ETF (IWMI) is a derivative income fund designed to offer investors exposure to small-cap companies while generating substantial income through an options strategy. With a reported dividend yield of 14.36%, this ETF focuses on writing covered calls to enhance distributions, a common feature in high-income derivative strategies. Launched in June 2024, the fund holds a concentrated portfolio of seven underlying assets, aiming to balance the growth potential of the Russell 2000 index with current income. Investors should note that while the expense ratio is 0.68%, the high yield comes with specific risks. Unlike traditional equity ETFs, derivative income funds may cap upside potential and expose holders to volatility in small-cap markets. It is crucial to understand that values can fall as well as rise, and past performance or high yields do not guarantee future returns.

SPYI (SPYI)

The NEOS S&P 500 High Income ETF is designed to provide investors with high monthly income by combining exposure to the S&P 500 index with a covered call strategy. This approach aims to generate option premium income to enhance yields, potentially at the cost of limited upside participation during strong bull markets. The fund is actively managed and maintains a large number of holdings to diversify its equity exposure. It may be suitable for investors seeking regular income streams, though high yields often come with increased complexity and different risk profiles compared to traditional index funds. Investors should consider that dividends are not guaranteed, can fluctuate significantly, and may include return of capital, which can erode net asset value over time.

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IWMI vs SPYI

Fund Snapshot