Is JEPI a long term investment?
However, JEPI may not be for beginners or long-term investors. For example, its hedge-fundlike qualities make the fund more complex than traditional ETFs and its performance will lag in up markets.
Due to its defensive structure, JEPI may underperform in the long run. This is not necessarily a bad thing because we are not forgetting what we like about JEPI: low volatility. Reducing it comes at a price and in this case it is not too high.
Given the method JEPI's portfolio managers generate income within the portfolio (Equity-Linked Notes), JEPI investors were hit with a double whammy - underperformance and higher tax rates. Looking toward 2024, there's much to be desired.
JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) is designed primarily for income-focused investors as it pays a monthly dividend. Based on its relatively attractive 8.3% payout, it's expected to be a core holding of income investors looking to focus on generating a sustainable monthly dividend.
What do analysts say about JEPI? JEPI's analyst rating consensus is a Moderate Buy. This is based on the ratings of 120 Wall Streets Analysts.
The downside of such a strategy is that it caps a lot of, if not all, share price appreciation potential because in a rising market, the call options would be exercised by the buyer at below market prices. That gives covered call ETFs a bit of an uneven return profile.
JEPI is not a bad ETF, but it and its peer group (covered call ETFs) are overrated by investors. And the cracks are starting to show. Extended down markets that don't immediately get back up are a risk to these ETFs not fully understood by many investors.
| ETF | Ticker | Assets Under Management (AUM) |
|---|---|---|
| Vanguard S&P 500 ETF | (NYSEMKT:VOO) | $435.2 billion |
| Invesco QQQ Trust | (NASDAQ:QQQ) | $259.6 billion |
| Vanguard Growth ETF | (NYSEMKT:VUG) | $118.8 billion |
| iShares Core S&P Small-Cap ETF | (NYSEMKT:IJR) | $79.8 billion |
- Vanguard High Dividend Yield ETF (VYM).
- iShares Core High Dividend ETF (HDV).
- Schwab U.S. Dividend Equity ETF (SCHD).
- SPDR Portfolio S&P 500 High Dividend ETF (SPYD).
- Vanguard International High Dividend Yield ETF (VYMI).
- Invesco S&P 500 High Dividend Low Volatility ETF (SPHD).
The largest Aggressive ETF is the iShares Core Aggressive Allocation ETF AOA with $1.88B in assets. In the last trailing year, the best-performing Aggressive ETF was AOA at 20.06%. The most recent ETF launched in the Aggressive space was the iShares ESG Aware Aggressive Allocation ETF EAOA on 06/12/20.
What is better than JEPI?
SPYI Outperforms Within Equity Income Category
JEPI brought in nearly $13 billion in net flows in 2023 in another monster year for options strategies. Since its launch in May 2020, the fund dominated the equity income category by AUM in 2022 and 2023.
JEPI is a for higher yields and reduced volatility (gains and losses). SCHD is for moderate yields and market volatility. SCHD is a well-established bedrock dividend ETF. JEPI is newer and untested in market volatility.
Overall, SCHD remains an attractive option for investors looking to balance income and growth in their portfolio. Its focus on quality large cap dividend payers, low expense ratio, and strong historical performance make it a solid choice for diversification and long-term investing.
Summary. Passive income is a great way to save for retirement. JEPI is popular among retirees due to its high yield, monthly payouts, and diversification that includes considerable tech exposure.
JEPI may be a good investment choice for income seekers and conservative investors who are looking for monthly dividends and lower risk exposure. JEPI will perform well in bear markets but may lack in bull markets due to its capped upside potential.
JEPI and JEPQ are covered call ETFs. The funds hold undervalued stocks in their respective benchmark indexes and sell covered calls (a basic and low-risk option strategy) against the benchmark indexes to generate income for investors via equity-linked notes (ELNs).
To unlock greater income potential in a Roth IRA, investors can opt for a derivative income fund such as JEPI, which uses more complex options selling strategies to produce higher-than-average yields.
JEPI may be tax-inefficient, as distributions from the fund may be taxed as income, and dividends from underlying stock holdings are not considered qualified because of the offsetting options positions. JEPI isn't eligible for Tax-Loss Harvesting, since we can't find a viable alternate fund.
RESULTS. Provided an attractive 12-month rolling dividend yield of 8.50% and 30-day SEC yield of 7.04%. Yield ranked in the top one-third of the Derivative Income category. Competitively priced vs. peers at 0.35%.
Is JEPI a Good Investment? JEPI can be a good investment for more experienced, risk-averse investors who are looking for an ETF that can provide low-volatility, stocklike returns with superior yields. However, JEPI may not be for beginners or long-term investors.
Should I invest in JEPI or 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.
| Symbol | ETF Name | 10y Chg 4-2-24 |
|---|---|---|
| SOXX | iShares Semiconductor ETF | 873% |
| PSI | Invesco Semiconductors ETF | 786% |
| META | Roundhill Ball Metaverse ETF | 717% |
| XSD | SPDR S&P Semiconductor ETF | 617% |
- Vanguard S&P 500 ETF (VOO)
- Schwab U.S. Small-Cap ETF (SCHA)
- Invesco QQQ Trust (QQQ)
- Vanguard High Dividend Yield Index ETF (VYM)
- Vanguard Total International Stock ETF (VXUS)
- Vanguard Total World Stock ETF (VT)
- iShares Core U.S. Aggregate Bond ETF (AGG)
Ultimately, investors choosing an ETF need to ask 3 questions: What exposure does this ETF have? How well does the ETF deliver this exposure? And how efficiently can I access the ETF? Look at the ETF's underlying index (benchmark) to determine the exposure you're getting.
| Stock | Forward dividend yield |
|---|---|
| Exxon Mobil Corp. (XOM) | 3.5% |
| Johnson & Johnson (JNJ) | 3% |
| Procter & Gamble Co. (PG) | 2.3% |
| Home Depot Inc. (HD) | 2.4% |
