In December 2022, he wanted to take his content a step further by creating an investing challenge that others could track and follow. Simply put, it was about building a portfolio worth $2 million in eight to 15 years. His ultimate goal was to end up with enough dividend-paying stocks that could pay out $80,000 to $90,000 annually.

The 28-year-old began experimenting with different types of securities to achieve his goal. Since he was young, he still had many years before retirement, meaning he could afford to ride out market volatility or make a few mistakes here and there while his followers took a cue from his experience.

For the challenge, he uses a regular brokerage account and a retirement account. He can put as much as he wants into the brokerage account, where he holds dividend stocks, technology stocks, a few ETFs and the S&P 500. In retirement, he has a 401(k) plan for self-employed or solo workers, which has a Roth with an annual contribution limit of $23,000, and an after-tax account with no contribution limit, where he invests in Vanguard indexes and individual stocks. He has also invested some bitcoin. His account value is now over $391,000, according to records from his brokerage firms seen by Business Insider.

This year’s options ETF

Hankwitz likes to look for ETFs that have a unique advantage over other ETFs. He previously invested in the NEOS Nasdaq-100 High Income ETF (QQQI) because it allowed him to buy shares of the Nasdaq 100 while simultaneously trading call options on the index. The second leg allows the ETF to make monthly payouts that equate to an annual return of 14.96% with an expense ratio of 0.68%.

He also started investing in a similar ETF for the S&P 500, the NEOS S&P 500 High Income ETF (SPYI). It uses the same options strategy for 500 of the largest U.S. companies. It pays out a return monthly, for an annual total return of 12.34% with an expense ratio of 0.68%.

Both ETFs came at the right time because they allowed Hankwitz to gain exposure to large-cap technology stocks, leading to market gains in 2023 and into 2024. However, towards the end of the year, the Federal Reserve is expected to cut interest rates, which could lead to a rotation in stocks.

As debt becomes cheaper, small-cap stocks, which have largely been left behind, are likely to benefit from an easing economy. The Russell 2000 saw early signs of this when the small-cap index rallied in July, initially triggered by weaker-than-expected consumer price index data, according to an Aug. 5 Bank of America note.

However, the index reversed shortly thereafter as a series of negative economic data arrived, including higher-than-expected unemployment and a slowdown in the manufacturing sector.

Nevertheless, markets believe that the first rate cut is likely in September this year, which could bring small caps back into focus. With this in mind, Hankwitz started to increase his exposure to small caps. But instead of buying ETFs that only track the Russell 2000, he invested in an ETF with the same structure as the SPYI and the QQQI from the same company: the NEOS Russell 2000 High Income ETF (IWMI). The fund is actively managed with exposure to the Russell 2000 while using options to benefit from tax loss harvesting.

The ETF sells and buys options on the Russell 2000 to profit from the index’s upside potential.

It pays a monthly yield, which equates to a total annual return of 14.03% with an expense ratio of 0.68%.

This bet has two benefits. First, he can benefit from the potential gains of the small-cap stocks he expects. Second, he gets a regular monthly payout while he waits for the small-cap stocks to rally. This reduces the tension of investing to time market rotations.