JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) was created last year as a result of JPMorgan Equity Premium Income ETF (JEPI) gaining a huge popularity among income-seeking investors. In less than 1 year of its existence, JEPQ reached an AUM size of $3.06 billion and continues to be one of the fastest growing and most popular covered call funds in the market. Many investors seem to think that JEPI and JEPQ are just slightly different versions of the same fund or even "sister funds" because they are managed by the same company but these two funds are actually quite different in several ways and it's important for investors to know the difference before deciding which one to invest in.
I am a big believer that investors should truly understand what they are buying and this article was written for this purpose and explain why JEPQ and JEPI are actually different funds with different philosophies, different goals and might actually be suited for different types of people.
Reason 1: JEPQ's portfolio philosophy is different from JEPI's
JEPI specifically picks stocks with low volatility. In order to accomplish this, the fund looks at Beta values of stocks before deciding on whether to add them to its portfolio or not. Beta is a measure of relative volatility of a stock in relation to the overall market. Technically it can range from almost 0 to upwards of 10 but the great majority of stocks will have Beta values ranging from 0.5 to 3. A Beta value of 1.0 would mean that a stock's volatility level is exactly same as S&P 500 which means that when S&P 500 is up or down 1%, this stock would also be up or down 1% in general. A Beta of 0.5 would mean that a stock is only half as volatile as the market, meaning when the market rises or falls 1%, this stock generally rises or falls 0.5%. A Beta of 2 would indicate that the stock is twice as volatile as S&P 500 on a given day and so on.
JEPI specifically picks stocks with low beta values in order to make sure that its holdings aren't highly volatile. The average holding of JEPI typically has a beta of 0.7 and the fund itself has a beta of 0.61 which means the average holding of JEPI is 30% less volatile than S&P 500 and JEPI is 39% less volatile than the index. Selection of low Beta stocks is intentional, by design and happens to be a huge part of JEPI's active management strategy.
On the other hand, JEPQ doesn't make selections based on Beta at all. Most of JEPQ ETF's holdings are highly volatile. Below are the top 7 holdings of JEPQ and almost all of them are significantly more volatile than the market. I am not saying this to mean that JEPI is a better fund than JEPQ because its holdings are far less volatile. I am basically saying that these are two different funds with different strategies, different goals and investors shouldn't use them interchangeably just because they are managed by the same company. For some people, JEPI will be the better choice, others JEPQ will be the better choice, for others both will be a good choice depending on their investment goals and philosophy.
Since JEPQ deals with more volatile stocks on average, we can also say that its call option premiums will be larger and its dividend yield will be slightly higher in the long period. In return it could drop more in value than JEPI during a bear market.
Reason 2: JEPQ is far more top-heavy than JEPI
Another thing that makes JEPQ different from JEPI is that it is very top heavy. JEPQ currently holds 80 positions and top 10 positions account for more than 55% of the fund's total weight. In comparison, JEPI holds a total of 136 positions and top 10 positions make up only 15% of the fund's total weight. JEPQ is more than 3x as top-heavy as JEPI and JEPQ's performance will be mostly driven by top 5-6 stocks whereas JEPI's performance will be driven by far more stocks.
Again, this doesn't mean one fund is better than the other. It just means that when investors are choosing a fund to invest their money in, they should have a good understanding of what that fund does, how that fund works and how that fund is different from other similar funds so that they can make a fully informed decision about which fund or funds to put their money in so that they can fulfill their personal goals in the best way possible.
Those who are more comfortable with JEPQ's top-heavy approach can invest more of their money into JEPQ whereas those who want more diversification in their portfolio can go with JEPI. Of course you can also do what I did and divide your JEPI/Q allocation equally between the two funds.
Reason 3: JEPI is more actively managed than JEPQ
JEPQ is highly focuses on mega cap tech stocks (mostly Nasdaq 100 index) which means it rarely trades in and out of positions. For example the top holdings of JEPQ will always be a combination of Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Google (GOOG) (GOOGL), Meta (META), Nvidia (NVDA) and Tesla (TSLA) unless something drastically changes in the tech space. In fact, JEPQ's stock allocations and weights will be very similar to those of Nasdaq 100 index (QQQ).
JEPI is a completely different game. Since the fund doesn't limit itself to a specific industry, it has a much larger pool of stocks to choose from. This allows the fund to be more flexible as it trades in and out of positions and it will be managed more actively whereas JEPQ's holdings will be mostly static since it has only so many positions it can trade in an out of.
Again, your personal goals and preferences should dictate which approach you prefer over the other. It's impossible to tell whether one is better than the other.
When we look at performance of the two funds in the last 12 months, we see a period where the two funds performed equally (from June to October), we see a period where JEPI outperformed (from October to February) and we see a period where JEPQ outperformed (from February to now). It looks like when S&P 500 was outperforming Nasdaq, JEPI outperformed and when Nasdaq was outperforming S&P 500, JEPQ outperformed. This means if you are more into S&P 500, you might want to put more of your money into JEPI but if you are more into Nasdaq, you can put more of your money into JEPQ.
Conclusion
Looking at their name and ticker, you might be inclined to think that JEPI and JEPQ are very similar funds with slightly different focus but in fact they are completely different funds with different philosophies, different approaches, different strategies and goals. This is not to say that one fund is better or more preferable than the other. Investors should study their options and gain a good understanding of funds before investing into them and put their money into funds that best fit their investment philosophy, long term goals and risk appetite. For some investors, JEPI will be the better choice, for others JEPQ will be the better choice. For some (like me) a mix of the two will get the job done. It all depends on your goals and preferences.
This article was written by
Diesel
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I own separate portfolios for separate goals. I have one portfolio where I have nothing but income plays, another portfolio where I have nothing but growth stocks. I also have another portfolio where I run my options plays. I try not to mix different portfolios because they all have different goals and purposes. Sometimes one of my portfolios outperform other times other do. I am a big believer of diversification of not only assets but also methods and investment philosophies. Diversification is not simply buying 20 different stocks, it is applying different methods to different goals that fit to serve an investor's short term and long term targets.I am a "long only" investor and stay away from shorting companies. I will also do a lot of delta-neutral options plays where I will try to benefit from a stock or funds lack of movement. Also a huge fan of options plays and strategies including but not limited to covered calls, iron condors, butterflies, calendar spreads, call-put spreads. I've probably tried every options play there is, sometimes with success, sometimes with failure.At Seeking Alpha, I mostly analyze and write about stocks and funds that I own or I plan on owning. I rarely ever write about a stock or fund I at least don't have intention of owning some day.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of JEPQ, JEPI either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
FAQs
What is the difference between JEPI and JEPQ ETF? ›
The real difference comes down to how the strategies are implemented. JEPI focuses more on taking a diversified approach and investing in low beta stocks. JEPQ on the other hand is more top heavy in terms of top 10 positions and the technology sector overall.
What is the JEPQ equivalent to? ›Global X SuperDividend US ETF (NYSEARCA:SDIV)
Like JEPI and JEPQ, the GlobalX Super Dividend ETF is another monthly dividend payer.
JPMorgan Equity Premium Income Fund Inst (JEPIX) is the mutual fund version of JEPI and is run by the same managers with the same strategy.
Is JEPQ a good investment? ›JEPQ's analyst rating consensus is a Moderate Buy.
Does JEPQ pay monthly dividends? ›JEPQ Dividend Information
JEPQ has a dividend yield of 11.83% and paid $5.64 per share in the past year. The dividend is paid every month and the last ex-dividend date was Jun 1, 2023.
The biggest difference between ETFs and index funds is that ETFs can be traded throughout the day like stocks, whereas index funds can be bought and sold only for the price set at the end of the trading day. For long-term investors, this issue isn't of much concern.
What are the risks of JEPI? ›The risk with those is that if counterparties default on those contractual obligations, JEPI can blow up. In other words, those who think they can safely buy 100% JEPI and retire rich are taking on much more income risk than they believe, especially if they think JEPI's income will keep rising yearly.
Is JEPQ good for retirement? ›JEPQ presents retirees and investors alike with the best of both worlds. The NASDAQ 100 equity and covered call ETF is designed to provide high income with the opportunity for capital appreciation. The ETF has just bounced off the lows and fulfilled a multiple bottom trend reversal pattern.
What are the top holdings of JEPQ? ›JEPQ's top 3 holdings are MSFT, AAPL, GOOG. ETF JEPQ's is holdings 81 different assets. ETF JEPQ's total assets are 3.46B.
Is JEPI or JEPQ better? ›Not surprisingly, JEPQ is more volatile than JEPI by about 30%, but it's also about 30% less volatile than the Nasdaq 100. Since its inception a year ago, JEPQ has returned 3.5% vs. a return of 4.8% for the Invesco QQQ Trust (QQQ).
Is JEPQ high risk? ›
JEPQ also takes more risk than other income based funds that use similar strategies focused on selling options to generate income such as RYLD and QYLD, since those funds are more diversified.
How does JEPI pay such a high dividend? ›JEPI does this by investing up to 20% of its assets into ELNs (equity-linked notes) and selling call options with exposure to the S&P 500.
What does JEPQ consist of? ›What is JEPQ? JEPQ is an actively-managed fund of US large-cap companies from the Nasdaq-100 Index, assessed and managed using ESG factors and a proprietary data science driven investment approach. The fund also invests in ELNs in seeking income generation.
How many holdings does Jepq have? ›JEPQ Holdings Information
JEPQ has a total of 88 holdings and holds stocks from all over the world. The top 10 holdings account for 56.22% of the fund's assets.
SCHP - Volatility Comparison. JPMorgan Equity Premium Income ETF (JEPI) has a higher volatility of 2.16% compared to Schwab U.S. TIPS ETF (SCHP) at 1.45%. This indicates that JEPI's price experiences larger fluctuations and is considered to be riskier than SCHP based on this measure.
What is the next ex-dividend date for JEPQ? ›JEPQ's next quarterly payment date is on Jun 05, 2023, when JEPQ shareholders who owned JEPQ shares before May 31, 2023 received a dividend payment of $0.36 per share.
How to get $5,000 in dividends a month? ›In order to make $5000 a month in dividends, you'll need to invest approximately $2,000,000 in dividend stocks. The exact amount will depend on the dividend yields for the stocks you buy for your portfolio. Take a closer look at your budget and decide how much money you can set aside each month to grow your portfolio.
How much does Jepi pay per share? ›JEPI's previous ex-dividend date was on May 31, 2023. JEPI shareholders who own JEPI ETF before this date received JEPI's last dividend payment of $0.36 per share on Jun 05, 2023. JEPI's next ex-dividend date has not been announced yet.
What are 3 disadvantages to owning an ETF over a mutual fund? ›- Disadvantages of ETFs. ETF trading comes with some drawbacks, which include the following:
- Trading fees. ...
- Operating expenses. ...
- Low trading volume. ...
- Tracking errors. ...
- Potentially less diversification. ...
- Hidden risks. ...
- Lack of liquidity.
ETFs have several advantages over traditional open-end funds. The 4 most prominent advantages are trading flexibility, portfolio diversification and risk management, lower costs, and tax benefits.
What's the best ETF to buy right now? ›
| ETF | YTD performance as of June 2 |
|---|---|
| Ark Innovation ETF (ARKK) | 33.2% |
| Global X MSCI Greece ETF (GREK) | 28.8% |
| Pimco Enhanced Short Maturity Active ETF (MINT) | 2.5% |
| iShares Gold Trust (IAU) | 6.8% |
A Long-Term Caveat
While JEPI shines as a high-yield fund during bear markets, it's important to remember that it's not built to outperform the stock market over the long haul. The fund's main aim is to provide a stable return of 6-8% per year, a target that may not compete favorably with the returns of a bull market.
If you're looking to get started as a dividend investor with an influx of tax return money, JEPI is a pretty good place to start. While the majority of dividend stocks and dividend ETFs pay dividends on a quarterly basis, this popular ETF pays them each month.
Does JEPI have downside protection? ›I own JEPI and view it as a key cornerstone of my portfolio that gives me some downside protection, exposure to a large swath of the U.S. economy, and, best of all, a steady stream of monthly payments that add up to a well-above-average 11.8% yield over the course of the year.
Is JEPI good for a Roth IRA? ›If you need a single-stock retirement portfolio and can avoid paying taxes, JEPI is a great choice. If you have decades to DRIP and thus avoid principal inflation erosion, JEPI is a potentially great choice. And if you own it in a Roth IRA? Then you never have to pay taxes on JEPI...
What is the healthiest age to retire? ›67-70 – During this age range, your Social Security benefit, if you haven't already taken it, will increase by 8% for each year you delay taking it until you turn 70.
Which stock has the highest allocation in one of the most popular tech ETF? ›Apple has the highest allocation of (19.3%) in the Vanguard Information Technology ETF.
Who are the largest holders of ETFs? ›BlackRock's iShares is the largest provider of ETFs as calculated by assets under management. Other major ETF providers include Vanguard, State Street, Invesco, and Charles Schwab.
Who are the largest market makers for ETFs? ›BlackRock, Vanguard, and State Street dominate the ETF market with the most offerings. The five largest ETF issuers have more than $100 billion each in ETF assets under management.
Who are the largest holders of JEPI? ›JEPI's top 3 holdings are ADBE, MSFT, AMZN. ETF JEPI's is holdings 119 different assets. ETF JEPI's total assets are 26.78B.
Why invest in JEPI? ›
The ETF offers an attractive yield of more than 11%. Further, its expense ratio of 0.35% is low and competitive with peers. Furthermore, JEPI has a low beta of 0.62, making it less susceptible to high volatility in the stock market. The ETF also looks attractive based on technical indicators.
Is JEPI active or passive? ›As of March 23rd, JEPI has swelled to over $24 billion in assets under management, making it the largest actively managed ETF listed on the U.S. market.
What is the Sharpe ratio of JEPQ? ›Sharpe Ratio Chart
The current JPMorgan Nasdaq Equity Premium Income ETF Sharpe ratio is 0.54.
The IRS taxes dividends and interest payments from ETFs just like income from the underlying stocks or bonds, with the income being reported on your 1099 statement. Profits on ETFs sold at a gain are taxed like the underlying stocks or bonds as well.
What does Jepi invest in? ›JEPI is an actively-managed fund that invests in large-cap US stocks and equity-linked notes (ELNs). It seeks to provide similar returns as the S&P. 500 Index with lower volatility and monthly income.
What is the price target for JEPI? ›| First down price target | 54.41 | First up price target |
|---|---|---|
| Second down price target | 54.40 | Second up price target |
| Third down price target | 54.28 | Third up price target |
| Fourth down price target | 54.26 | Fourth up price target |
| Fifth down price target | 54.18 |
JEPI Dividend Information
JEPI has a dividend yield of 11.00% and paid $6.04 per share in the past year. The dividend is paid every month and the last ex-dividend date was Jun 1, 2023.
- Verizon Communications (VZ) Verizon is a leader in communication and technology services. ...
- Walgreens Boots Alliance (WBA) ...
- 3M Company (MMM) ...
- Dow Inc. ...
- International Business Machines (IBM) ...
- Chevron (CVX) ...
- Amgen (AMGN) ...
- Cisco Systems (CSCO)
Jepi ETF – taxes
In short, you will be taxed at ordinary and qualified dividend income levels, aka at your ordinary income rate and at your long-term capital gains tax rate.
The JPMorgan Equity Premium Income ETF (JEPI) is an actively managed fund that generates income by selling options on U.S. large cap stocks. The fund invests in S&P 500 stocks that exhibit low-volatility and value characteristics, and sells options on those stocks to generate additional income.
Where can I buy JEPQ? ›
Robinhood gives you the tools you need to put your money in motion. You can buy or sell JEPQ and other ETFs, options, and stocks.
What companies are in QYLD? ›- MSFT. Microsoft. 13.92% $1.07B. ― $2.47T. ...
- Apple Inc. 13.10% $1.01B. ― $2.89T. 36.63% ...
- NVDA. Nvidia Corporation. 7.39% $570.32M. ― ...
- AMZN. Amazon.Com, Inc. 7.29% $563.12M. ― ...
- Tesla Motors. 4.60% $355.27M. ― $813.90B. ...
- META. Meta Platforms, Inc. 4.40% $339.98M. ― ...
- Alphabet Inc. Class A. 4.22% $326.22M. ― ...
- GOOG. Alphabet Inc. Class C. 4.17% $322.27M.
SCHD Dividend Information
SCHD has a dividend yield of 3.60% and paid $2.64 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 22, 2023.
| Ticker | Holdings | Shares |
|---|---|---|
| MSFT | Microsoft Corp. | 231,313,953 |
| AMZN | Amazon.com Inc. | 270,670,212 |
| NVDA | NVIDIA Corp. | 72,624,050 |
| GOOGL | Alphabet Inc. Class A | 185,824,117 |
The JPMorgan Nasdaq Equity Premium Income ETF is similar in approach to JEPI but focuses on Nasdaq 100 stocks. This is a fairly new ETF that launched in 2022 following the success of JEPI.
How does JEPI compare to spy? ›SPY - Volatility Comparison. The current volatility for JPMorgan Equity Premium Income ETF (JEPI) is 2.16%, while SPDR S&P 500 ETF (SPY) has a volatility of 3.42%. This indicates that JEPI experiences smaller price fluctuations and is considered to be less risky than SPY based on this measure.
What is the purpose of JEPI? ›JEPI is an actively-managed fund that invests in large-cap US stocks and equity-linked notes (ELNs). It seeks to provide similar returns as the S&P. 500 Index with lower volatility and monthly income.
What is the best age to retire with pension? ›67-70 – During this age range, your Social Security benefit, if you haven't already taken it, will increase by 8% for each year you delay taking it until you turn 70. So, if your benefit will be, say, $2,500/month if you start at your full retirement age, it would be more than $3,300/month if you can wait.
What does JEPQ invest in? ›What is JEPQ? JEPQ is an actively-managed fund of US large-cap companies from the Nasdaq-100 Index, assessed and managed using ESG factors and a proprietary data science driven investment approach. The fund also invests in ELNs in seeking income generation.
What is the downside of JEPI? ›Downsides of JEPI: The downsides of JEPI include its relatively high expense ratio compared to other income-focused ETFs. Also, since it focuses on income generation, it may not provide the same level of capital appreciation that some investors might be looking for.
Who should buy JEPI? ›
The main advantage of JEPI, apart from its lower expense ratio, is its ability to deliver consistent cash flows to shareholders over time. This makes it an attractive option for retirees who are living on investment income, as they can rely on JEPI's cash flow and reinvest the surplus accordingly.
Is now a good time to invest in JEPI? ›Currently there's no upside potential for JEPI, based on the analysts' average price target.
Does JEPI track the S&P 500? ›The JPMorgan Equity Premium Income ETF (JEPI) is an actively managed fund that generates income by selling options on U.S. large cap stocks. The fund invests in S&P 500 stocks that exhibit low-volatility and value characteristics, and sells options on those stocks to generate additional income.