The seven mega-cap tech companies sometimes dubbed the “Magnificent Seven” (e.g., AAPL/Apple, MSFT/Microsoft, GOOGL/Alphabet, AMZN/Amazon, NVDA/Nvidia, META/Meta, TSLA/Tesla) have dominated headlines, returns and valuations in recent years. Given their influence, it’s no surprise fund issuers have rolled out ETFs to capture various angles of this theme — growth, leveraged, income/derivative overlays, etc.
In this post I compare two specific ETFs:
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YMAG (YieldMax Magnificent 7 Fund of Option Income ETFs)
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MAGY (Roundhill Magnificent Seven Covered Call ETF)
I’ll walk through their structures, strategies, yields, risk profiles, tax/structural considerations, and conclude by making the case for which is the better long-term hold (and why the other may still serve a purpose).
Note: This is not investment advice; please do your due diligence.
What the Two Funds Are (At a High Level)
YMAG
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YMAG is offered by the YieldMax™ group (issued by Tidal Financial Group), under the “Magnificent 7” theme. Website Starter+2ETF Database+2
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It is a “fund-of-funds” structure: it invests primarily in seven underlying YieldMax ETFs (each of which is focused on one of the Magnificent Seven stocks). The fund in turn uses option/derivative overlays (a buy-write/capped-gain structure) to seek current income, while giving some exposure to the underlying stocks. Website Starter+1
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Key point: Because of the derivative strategy, upside gain is capped, but you remain exposed to downside risk. (“The fund’s indirect exposure to gains … is capped. However, it is subject to all potential losses if the shares of the underlying securities decrease in value.”) Website Starter+1
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Expense ratio: Approx 1.28% (gross) according to ETF Database. ETF Database
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Focus: current income + Magnificent Seven theme.
MAGY
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MAGY is offered by Roundhill Investments, as the “Magnificent Seven Covered Call ETF”. Roundhill Investments+1
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Strategy: the fund holds shares of the Roundhill Magnificent Seven ETF (ticker MAGS) and sells out-of-the-money call options on that underlying exposure on a weekly basis (i.e., a covered-call overlay). The goal: exposure to the Magnificent Seven stocks via MAGS, plus income from option premium. The strategy gives income, but again caps the upside, and you bear the bulk of downside risk. blog.roundhillinvestments.com+1
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Expense ratio: Gross ~1.28%, net ~0.99 (with waivers) as of launch. Roundhill Investments+1
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Inception: April 23, 2025. So it is very new. Roundhill Investments+1
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Focus: weekly income + Magnificent Seven theme.
Strategy Deep-Dive: Differences & Implications
While both funds focus on the “Magnificent Seven” theme and incorporate option overlays, the differences in structure, overlay type, exposure and target investor profile are meaningful.
Underlying Exposure
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YMAG: It invests via underlying YieldMax single-stock funds (each tied to one of the Magnificent Seven). So you are exposed to each of the individual stocks via specialized funds. YMAG thus carries granular exposure (via the underlying) + derivative overlays.
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MAGY: It holds MAGS, which is a basket ETF (equally weighted among the Magnificent Seven stocks). So you get exposure to the basket rather than individual single-stock pods. Then it overlays covered calls on that basket. This arguably makes exposure more diversified across the seven.
Option/Overlay Strategy
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YMAG: The strategy is “buy-write” (own underlying, write call options) via the underlying YieldMax ETFs; upside is capped. It’s more complex because the underlying funds may themselves employ derivatives. The documentation warns that losses of the underlying are not offset by income necessarily. Website Starter+1
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MAGY: Standard covered-call on MAGS: you hold the basket, sell weekly calls. The risk is you give up upside above the strike, and you still suffer the full downside of the basket. The issuer emphasizes this is more defensive, income-focused strategy (especially in flat or down markets). blog.roundhillinvestments.com+1
Income vs Growth Tradeoffs
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YMAG: because of the income-oriented overlay, one should expect higher current yield, but constrained upside. Indeed analysts describe it as “the Mag 7, but with 70% more yield”. Seeking Alpha
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MAGY: Also positioned as income/covered-call play; income is a primary objective, with exposure to the Magnificent Seven. However, given its newness and structure, capital appreciation may be more modest or capped compared to pure growth.
Risk Profile
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Because both cap upside, their principal value performance will heavily depend on the Magnificent Seven stocks’ performance below the cap. If the stocks rally strongly, both funds will underperform a pure long exposure, because the call options limit gains. If the stocks plunge, you still get full downside (less maybe some premium buffer).
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YMAG has extra complexity (via underlying funds) and is newer, which introduces structural risks (tax treatment, derivative wrap-layers) that analysts point out. Seeking Alpha+1
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MAGY, though also new, is more transparent (basket + covered call) and may be slightly simpler to understand. That said, it is still concentrated (just Magnificent Seven stocks), non-diversified in the sense of sector/market, and the covered-call strategy may perform poorly in strong bull markets.
Tax & Structural Considerations
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For YMAG: The documentation notes “the most recent distribution … contains 94.21% return of capital and 5.79% income.” Website Starter That means much of what is distributed is a return of capital (ROC), which reduces cost basis and may have tax implications.
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For MAGY: The fact sheet states that distributions may exceed the fund’s current income and earnings and profits, and such excess distributions will be treated as return of capital. Roundhill Investments+1 In other words, investors must be aware that high “yield” may reflect return of capital rather than genuine earnings/income.
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This matters for long-term holders: ROC doesn’t guarantee sustaining value, and lowering cost basis might help taxes now but doesn’t solve structural risk of underlying losses.
Fees, Liquidity & History
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Both have elevated fees relative to plain vanilla broad-market ETFs. YMAG ~1.28% established; MAGY gross ~1.28% (net ~0.99 via waiver).
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MAGY is very new (April 2025) → limited track record. YMAG albeit still relatively new (Jan 2024) but has slightly longer history.
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Liquidity and AUM: New funds may have lower assets, wider bid-ask spreads, early-stage risks. Investors need to be cautious.
Performance & Yield Snapshot
Because both are recent launches, long-term performance beyond a few quarters is limited. But some data helps illustrate relative dynamics.
YMAG
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According to ETFDB, YMAG launched Jan 29, 2024. ETF Database
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From various sources, returns in early tracking show it delivering income and moderate growth, though upside is capped.
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Given its structure, much of the return is derived from option premiums rather than explosive stock gain.
MAGY
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Launched April 23, 2025. Roundhill Investments+1
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Because of its recent launch, long-term data is extremely thin. So we’re in the territory of projected vs historical.
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Dividend/Income yield: in some sources, forward yield in the 30%+ range (which obviously reflects covered call premiums + return of capital) but must be viewed in light of risk. Dividend.com+1
Yield comparison
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YMAG: High yield, but part of distribution may be return of capital. For example, the 30-day distribution for August 2025 had ~95.90% return of capital component. Website Starter
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MAGY: While marketed as “weekly income,” the fund’s own disclosures caution that distributions may exceed income and gains, thus ROC. Roundhill Investments+1
Implications
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A very high yield may look appealing, but if it’s largely return of capital, the underlying NAV is being pared away. For long-term growth investors, that’s a risk.
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Because upside is capped (via call writing), if the Magnificent Seven stocks rocket, both funds will lag “pure” long exposure funds.
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Conversely, in flat or down markets, covered-call/option income strategies can shine by generating premium when volatility is elevated (which increases option income). Roundhill explicitly says MAGY may “outperform … in flat-to-down markets”. blog.roundhillinvestments.com
Which One Is Better for a Long-Term Hold?
Given all the above, the question is: If you were picking one of these two for a long-term hold (say 5-10 years), which is the better choice for most investors?
My verdict: MAGY has the edge for most long-term investors who prioritize income + moderate growth within the Magnificent Seven theme.
Here are the reasons why I lean MAGY — followed by caveats and why YMAG might still be appropriate for some.
Why MAGY > YMAG for long-term hold
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Simplicity & Transparency: MAGY’s strategy is easier to understand: basket of Magnificent Seven names (via MAGS) + weekly covered call. YMAG’s strategy (fund-of-funds + derivative wrap) is more complex, which adds structural risk and makes future behavior less predictable.
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Diversified within theme: Because MAGY uses the MAGS basket, you get exposure to the full suite of Magnificent Seven with equal weighting rather than the more niche underlying funds in YMAG. For a long-term hold, that tends to reduce idiosyncratic risk (versus single-stock pods).
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Income-first, with option income in covered-call environment: The covered-call strategy of MAGY is designed to perform better in markets that are sideways or moderately up (rather than hyper-bull). Since many investors believe markets will be more volatile and less straight-up for the next decade, a strategy that earns option premiums could have a leg up. Roundhill’s own marketing emphasizes this. blog.roundhillinvestments.com
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Cost and fee structure: While both have elevated fees, MAGY’s net 0.99% (via waiver) is reasonable for the strategy. YMAG’s 1.28% plus additional layers raise the hurdle for net return.
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Tax/ROC awareness: MAGY explicitly discloses the return-of-capital possibility. That transparency helps long-term investors monitor cost basis and tax treatment. YMAG also has ROC issues, but the layered structure makes it harder to monitor.
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Long-term alignment with theme: If you want exposure to the Magnificent Seven and you want income while accepting capped upside, MAGY aligns nicely. It provides a balanced way to “ride” these mega-cap names without expecting double-digit CAGR’s of past years, but instead a more moderate steady return-with-income profile.
Why YMAG might still make sense for some
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If your primary goal is maximizing current income (and you are willing to accept that much of that may be return of capital and that capital growth may be limited) then YMAG might appeal.
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If you have a shorter horizon or are using the fund for a specific income-generation strategy (rather than pure growth), the higher yield might make sense.
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If you are sophisticated and comfortable with option overlays and want a more exotic structure.
Why YMAG falls short for broad long-term hold
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The upside cap means that if the Magnificent Seven go on another decade-long bull run, a lot of that upside will be given up via the call writing. That means YMAG may meaningfully underperform a plain long basket fund of those stocks.
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The return-of-capital component means that what appears as “yield” isn’t necessarily sustainable, and the NAV may gradually decline if underlying stocks drop. For a buy-and-hold investor, that’s risk.
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Complexity: The fund-of-funds plus derivative wrap structure adds another “black box” layer, making it harder to forecast behavior across market regimes.
Key Considerations & Risks (Especially for Long-Term Investors)
Regardless of which you pick, these funds warrant special attention due to their structure and theme.
1. Theme Concentration
Both funds are concentrated in a narrow theme (Magnificent Seven tech stocks). That means they have high correlation to those names and are not diversified across sectors or styles. If the Magnificent Seven underperform, the funds will likely suffer. Conversely, the funds may lag in a broad market rally where other sectors lead.
2. Covered Call / Option Overlay Risk
Covered call strategies limit upside and yet do not fully protect from downside. If the stocks plunge, while some premium is earned, it may not fully offset the drop in value of underlying shares. Investors need to be comfortable with the fact that these funds are income-oriented rather than growth-oriented.
3. Return of Capital (ROC) Considerations
High yield often involves some ROC component. While ROC may not be taxable immediately, it reduces your cost basis and may mask deterioration of underlying value. Over time, if NAV is declining, what looked like “income” may simply be return of your capital.
4. Fee and liquidity issues
Higher expense ratios eat into returns. Newer funds (especially MAGY) have limited track record and smaller AUM, potentially less liquidity. That increases the risk of more significant tracking error, wider bid-ask spreads, and less resilience in stressed markets.
5. Market regime sensitivity
As noted, these strategies tend to perform best in sideways or moderately up markets with elevated volatility (which generates option premiums). In a sharp, sustained upward market, the capped upside will cause under-performance vs a plain long index or plain long Magnificent Seven basket. In a sharp downturn, you still bear most of the downside. So aligning with your market outlook is important.
6. Tax and structure nuances
Professional investors or taxable accounts should pay attention to how distributions are characterized (ordinary income vs ROC), how cost basis is affected, and how call writing or derivatives may impact tax treatment. Complexity increases for funds like YMAG.
Practical Implementation Considerations
Here are some practical questions and suggestions if you’re considering one of these funds for a portfolio.
Where they might fit in a portfolio
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If you have a core long-growth portfolio (e.g., S&P 500 index, or a diversified tech fund), you could use one of these as a satellite holding to tilt toward income + Magnificent Seven exposure.
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If you’re income-focused (e.g., retirees, or those looking for yield) and comfortable with underlying tech risk, MAGY might fit better (in my view).
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If you’re purely chasing yield and are comfortable with structural risk and limited growth, YMAG could be a speculative income piece.
Monitoring and rebalancing
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Because these are relatively new and theme-specific, monitor the underlying Magnificent Seven stocks and the fund’s performance relative to them.
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Keep an eye on the composition of distributions (how much is ROC) and whether premium income remains robust (which depends on implied volatility and option market conditions).
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Rebalance periodically if the allocation becomes large relative to your overall portfolio; treat this as higher-risk/high-theme exposure rather than portfolio backbone.
Time horizon and exit strategy
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For long-term hold (5-10 years or more), you must believe that the Magnificent Seven will continue to be drivers of value and that option premiums will remain meaningful. If your belief is that a new era of broad-based growth is coming (or new sectors will dominate), these funds may under-perform broad market alternatives.
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Decide in advance your “stop loss” or “trim” thresholds. For example, if underlying theme falters or covered call premiums collapse, consider moving to less concentrated strategies.
Compare to alternatives
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A simple alternative: buy a plain basket ETF of the Magnificent Seven (e.g., MAGS) without call writing. That gives full upside (and full downside), but no income overlay. For growth investors that may be better.
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Another alternative: diversify across sectors with moderate overlay/income strategies instead of concentrating in one theme.
Conclusion: Which Is the Better Long-Term Hold and Why
Putting it all together: For a long-term investor seeking income plus moderate growth from the Magnificent Seven theme, with an eye toward sustainability and manageable risk, MAGY is the more compelling choice. Its simpler structure, basket exposure, and covered-call overlay align better with a long-term income-tilt strategy.
That said, if your primary goal is extremely high current yield, you’re comfortable with complexity/structural risk, and you accept that capital appreciation will be modest, then YMAG could still be appropriate — just not as the core of a long-term hold.
When choosing, ask yourself:
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Do I need income or growth (or both)?
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Am I comfortable capping upside?
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Do I believe the Magnificent Seven theme will outperform in the next decade (or at least hold up)?
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How sensitive am I to downside risk, and how transparent does the fund need to be?
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What tax/tax-basis implications does the distribution structure imply?
In a world where many investors expect volatility, slower growth and dispersed leadership beyond a handful of mega-caps, a fund like MAGY gives you a way to stay “in the game” of the Magnificent Seven while generating income and moderating (but not eliminating) risk. YMAG remains an interesting specialized vehicle, but its payoff profile is more niche and may suit only a subset of income-oriented investors.