Written By Josh Smith
JEPI (JPMorgan Equity Premium Income ETF) and JEPQ (JPMorgan Nasdaq Equity Premium Income ETF) are newer funds managed by JP Morgan. JEPI was launched in May 2020. And JEPQ was launched 2 years later in May 2022.
Both of these funds aim not to beat the overall stock market over the long run (as measured by the S&P 500 index) but to offer consistent monthly income to investors focused on dividends.
Both of these funds aim to offer investors a less volatile option when it comes to investing in the stock market. They do this by selling options against their portfolio of large blue-chip U.S. stocks, aiming to get monthly income from option premiums and stock dividends.
Due to the nature of both of these funds, they will likely do well during bear markets and economic turbulence and underperform during bull markets.
Let’s dive into these funds and break them down into simple terms!
JEPI - JPMorgan Equity Premium Income ETF
Goal: Makes money by selling options and investing in large blue-chip U.S. stocks, aiming to get monthly income from option premiums and stock dividends. The fund seeks to offer a consistent income stream with lower volatility than the S&P 500. It is ideal for retirees or those ready to live off their investments.
Number of companies held: 128
JEPI dividend yield: 6.32%
JEPI Expense Fee: 0.35%
Pros of JEPI:
JEPI was one of the most popular ETFs of 2022. Attracting all types of investors with its high-yield monthly paying dividend payment. JEPI is structured to deliver a 5% to 8% dividend yield over time, and 6% to 10% annual returns. The fund does this by using covered calls, meaning it writes options against an underlying portfolio of stocks in the fund to generate extra income.
Cons of JEPI:
Beating the stock market isn't the goal of this fund, and JEPI fund managers make it clear that investors shouldn't expect the high dividend yield to continue. Covered call ETFs generally perform best in volatile bear markets, which is likely why this fund was a favorite in 2022.
The Top 10 Stocks Held In $JEPI:
JEPQ - JPMorgan Nasdaq Equity Premium Income ETF
Goal: Seeks to deliver a significant portion of the returns associated with the Nasdaq 100 Index with less volatility. Makes money by selling options and investing in NASDAQ 100 stocks, aiming to get monthly income from option premiums and stock dividends. It is ideal for retirees or those ready to live off their investments.
Number of companies held: 83
JEPQ dividend yield: 9.16%
JEPQ Expense Fee: 0.35%
Pros of JEPQ:
JEPQ offers an attractive dividend yield. However, just like JEPI, JEPQ is structured to deliver a 5% to 8% dividend yield over time, and 6% to 10% annual returns. The fund does this by using covered calls, meaning it writes options against an underlying portfolio of stocks in the fund to generate extra income.
Cons of JEPQ:
Beating the stock market isn't the goal of this fund, and JEPQ fund managers make it clear that investors shouldn't expect the high dividend yield to continue. Covered call ETFs generally perform best in volatile bear markets, which is the cause of the current high dividend yield. But don’t expect this dividend yield to remain elevated forever.
The Top 10 Stocks Held In $JEPQ:
My Thoughts: JEPI vs JEPQ
These funds could be good options to add to your portfolio if you’re looking to prioritize dividend cash flow and minimize volatility in your portfolio.
The big difference between the two funds is that JEPI is focused on the S&P 500 index. While JEPQ is focused on the NASDAQ 100 index.
One thing to remember is that although both of these funds offer attractive dividend yields right now, the high yields aren’t likely to continue into the future.
The funds weren’t created to outperform the stock market over the long run. Instead, they were made for people looking to minimize portfolio volatility and earn consistent monthly dividend payments. So although they might outperform during bear markets… bull markets will be another story.
I hope you found my blog post helpful! Make sure to share it with whoever you think would benefit from it. :)
By the way:Sign up for my email list to be the first to know when I publish a new blog post!
I recently put together a master list of 88 different ETFs designed to support different investment goals. You can grab it here.
As Always: Buy things that pay you to own them.
-Josh
Blog Post: #085
Do you have a suggestion on which ETFs I should compare next? Let me know here. :)
Josh Smith
