https://www.bloomberg.com/news/articles/2026-10-16/-dividend-nomads-chase-passive-income-with-high-yield-etfs

Jae Hyouk Jang travels for months at a time, making his way across Thailand, Vietnam and Laos in the past year. The 43-year-old recently quit his job as a security specialist and didn't walk away rich. Instead, he’s living off just $130,000 in savings using a supercharged investment strategy that’s allowed him to leave the 9-to-5 behind.

“I know some people might look at my decision and think it’s risky or even irresponsible,” Jang said in a social media post as he embarked on his adventure. “To me, the real risk is spending your life doing something that doesn’t bring you joy, waiting until you’re 65 to start living.”

Jang is part of a nascent community of self-styled “dividend nomads” who fund a life of itinerant travel through a combination of investments in exchange-traded funds and cheap living abroad. It’s a new twist on Financial Independence, Retire Early, or FIRE, a movement that encourages people to exit the workforce early. Rather than focusing on extreme saving to build a retirement-size nest egg in their 30s or 40s as FIRE practitioners do, dividend nomads prioritize ETF investments that use options and other derivatives contracts to provide monthly income.

Wall Street has rolled out hundreds of these so-called derivative income funds whose annual yields can stretch well into the double- and even triple-digits. Assets in the ETFs, which often charge investment fees of 1% or more, have quadrupled over the past three years to more than $270 billion as online influencers touting early retirement hacks have piled in.

Yet there are drawbacks, as Jang discovered earlier this year. He bought several derivative income ETFs including YieldMax COIN Option Income Strategy ETF (ticker CONY), which boasts an annual payout rate of 58%, generated by selling call options on the stock of cryptocurrency brokerage Coinbase Global Inc.

When Coinbase stock began to tumble last fall, CONY’s value plunged nearly 40%, cutting into the size of the fund’s weekly distributions. Uneasy with the volatility, Jang shifted his holdings away from the fund. While he managed to break even across his income portfolio, he is taking a more conservative approach today, moving money into safer ETFs, such as ones that track the S&P 500.

The scare was enough for Jang to consider employment again, perhaps in remote jobs like becoming a Korean language teacher for English speakers.

Financial advisers warn such pitfalls are all too common with investments promising fat dividend yields. Derivative income funds generate their outsize payouts by selling derivative contracts like call options on their target assets, which are often stocks or cryptocurrencies. The tactic can throw off gobs of cash in the right market conditions but caps investors' gains in bull markets and leaves them little protection when the target assets sell off.

In other words: The dividend nomad lifestyle can be a lot harder to sustain than its online fans make it appear.

“A retirement plan that only works when markets go up isn't a plan. It's a bet,” said Jeff Judge, managing partner at Chesapeake Financial Planners. Plenty of the new funds have “never lived through a real bear market,” he added.

YieldMax spokesperson Michael Khouw said the firm’s funds aim to outperform their target stocks while reducing volatility, and most have produced attractive returns even though CONY “did not keep up with our internal benchmarks.”

Other dividend nomads, like Dave and Mor Vanderhoef, have been striving to make the math work without reaching quite so far for yield.

Currently living in Portugal, the Vanderhoefs aim to up their chances of long-term success in part through careful budgeting. The 40-something couple, who met during the pandemic, have over $500,000 socked away, mostly in risk assets, like stocks and cryptocurrencies.

For dividend income, they rely on just $70,000 invested in ETFs like the JPMorgan Equity Premium Income ETF (JEPI). That fund, the second-largest active ETF on the market, is a mainstay in many baby boomers’ retirement portfolios and yields about 8% — making it a far tamer option than some newer funds.

The Vanderhoefs’ dividend ETFs throw off around $700 a month, covering up to 50% of their $1,400 to $2,000 in monthly expenses. The couple fills in gaps by working at a local commercial vegetable garden and a nearby vineyard, where they can earn over $2,000 a month during busy seasons.

That income would be hard to live off of in the US. But in Portugal, their biggest expense is a three-bedroom apartment that costs just over $1,000 a month. Beyond that, the couple economizes. Dave said the vegetable garden allows him to bring home free bags of fresh groceries. He’s used the same laptop since 2017 and considers dining out and attending a concert as “luxury goods.”

Still, there have been trouble spots. An 8% drop in the dollar against the euro since the start of 2025 has made the Vanderhoefs’ US savings worth less. They also worry about a bear market. In that case, Dave said, they would dip into their savings or work more, even go back to 40-hour weeks if necessary.

Financial planners echo those concerns. “Everything has to work exactly right,” said Mark Moberg, a US financial adviser at Green Ocean Global Advisors, who’s based in Sintra, Portugal, and has worked with people considering the nomad lifestyle. “Nothing always, always goes right.”

One pair of nomads that’s made it work long-term is Kristy Shen, 43, and Bryce Leung, 44. After years of aggressive working and saving, the Canadian couple quit their jobs in 2015 with $1 million and started traveling.

For five years before the pandemic, Shen and Leung didn't live anywhere permanently. Spending time in Southeast Asia and Eastern Europe, they cut their $50,000 in annual spending by half — an amount they could easily cover with $30,000 in dividend income.

“You could actually just stay in Athens, live out of an Airbnb, and it's half the price that I was paying in Toronto,” Shen said. “When we went to Thailand, we rented a condo with a swimming pool for the equivalent of $500 a month.”

The couple returned to Canada in 2020 to take care of Leung’s ailing father. They had a baby and went back to traveling again in 2023 until the end of last year.

Unlike newer dividend nomads, they are skeptical about funds that promise a shortcut through double-digit yields. They prefer ETFs that target traditional assets, like the BMO Laddered Preferred Share Index ETF (ZPR@CN) and iShares Core MSCI EAFE ETF (IEFA). Overall, their funds yield just under 3% on average.

One key factor in their success: Despite skipping office jobs, they are hardly retired. They work regularly by freelance coding, blogging and penning books about FIRE. That’s helped Shen and Leung grow their nest egg to more than $3 million. Last year, the family earned just over $80,000 in dividends and spent $58,000.

With a three-year-old, Shen and Leung now live in a rent-controlled apartment in Vancouver. Being nomads with a kid is more expensive and requires a lot of work, the couple said. Still, they may pack up again.

“At the end of the day, financial independence is about choosing what lifestyle makes the most sense for you,” Leung said.

(http://www.autoadmit.com/thread.php?thread_id=5913325&forum_id=2#50192880)