Is JEPI a good investment? – dividend & long term goals

Noah Mitchell
By Noah Mitchell 12 Min Read
12 Min Read

Future investor! If you’re on the hunt for a way to grow your money and not take too many risks, you might want to check out JEPI, also known as the JPMorgan Equity Premium Income ETF. But what exactly is it, and should you think about adding it to your money-growing toolbox? Let’s dive into it!

1. What Has JEPI Been Up To Since It Started?

JEPI made its debut in May 2020, and it’s been getting a lot of attention from people looking to invest their cash. As of April 2023, it’s holding over $3.5 billion in assets, which is a fancy way of saying it has a lot of money invested in it. Plus, it charges a fee called an expense ratio of 0.35%, which is like a small fee for managing your money.

Now, let’s talk about how JEPI has performed since it came into the investing world. It’s been doing pretty well compared to its buddy, the S&P 500, which is a big group of stocks that people often use to see how well the stock market is doing.

2. How JEPI Stacks Up Against the S&P 500

Imagine you have a tool called TradingView. It’s like a pair of special glasses that help you compare how well JEPI is doing compared to the S&P 500. When you put those glasses on, you can see that JEPI is a bit like a gentle roller coaster ride, while the S&P 500 can be a bit more of a wild ride. But here’s the cool part: they’ve had similar results since JEPI started.

Oh, and if you sign up for TradingView using a special link, you can get a free trial and a discount on your subscription. Saving money is always a good thing!

3. Earning Money with JEPI

Now, let’s talk about the green stuff – money! JEPI is like a money-making machine. It doesn’t just sit there; it makes money in a couple of ways. One way is through something called dividends. Think of dividends as a little bonus you get for owning a piece of JEPI. Over the last year, JEPI has been paying out dividends, and if you had invested $10,000 when it first started, you would have received about $1,190 in dividends. It’s like getting a small gift every month for being an investor!

So, there you have it, young investor. JEPI is like a steady friend that doesn’t like wild adventures but still brings in some good money. But remember, all investments come with some level of risk, so it’s essential to do your homework and think about what’s best for your money goals. Happy investing!

How Does JEPI Pick Stocks and Deal with Options?

Alright, let’s get into how JEPI works its magic with stocks and options. It’s not as complicated as it might sound!

1. Choosing the Right Stocks

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JEPI starts by picking special kinds of stocks from the S&P 500. But how does it choose? Well, it uses something called ESG criteria. What’s that? It’s like a checklist to see if a company is doing good things for the environment, society, and how they’re managed. Think of it as picking companies that are responsible and act sustainably.

JEPI also looks at other stuff like dividend yield (that’s how much money they give back to investors), earnings growth (how fast they’re making more money), and something called price-to-earnings ratio (which is like a fancy way to see if a stock is cheap or expensive).

As of April 2023, JEPI has 95 different stocks in its pocket. The biggest chunks of these are in areas like technology, healthcare, stuff people buy for fun (consumer discretionary), and finance.

2. Playing the Options Game

Now, let’s talk about options, but don’t worry, it’s not as confusing as it sounds! JEPI sells something called call options, and it does this using what’s known as equity-linked notes (ELNs). These ELNs are like special contracts that are tied to the performance of a stock or something like that.

When JEPI sells these call options, it’s like lending them to other people who want to buy the stocks at a specific price (called the strike price) before a certain date (called the expiration date). If the stock stays below that price, JEPI gets to keep the money they got from selling the options and still has the ELN. But if the stock goes higher than the strike price, JEPI has to give the ELN to the person who bought the option and, in return, gets the strike price.

3. JEPI’s Smart Plan

JEPI has a smart strategy. It wants to let you join in on the stock market fun but without too many wild ups and downs. By picking those low-volatility stocks, it’s not as affected when the stock prices jump around or when the whole market gets a bit shaky.

And by selling those call options, JEPI gets extra money (called premiums) and some protection in case things go south.

So, what’s the main goal here? JEPI wants to be less jumpy than the S&P 500 but still make you some extra money. It’s like finding a way to enjoy the roller coaster without getting too dizzy!

What Are the Possible Downsides and Risks When You Invest in JEPI?

Hey, curious investor! While JEPI can seem like a promising way to make some money while keeping things safe, there are some things you should be aware of:

1. The Market Can Be Tricky

JEPI’s performance depends a lot on how the overall stock market is doing and how the stocks it picked are behaving. If everyone’s feeling super confident about stocks (that’s what we call a bullish market), JEPI might not ride the high waves because of its option strategy. But if things are looking gloomy (a bearish market), JEPI could lose money because it’s still holding those stocks.

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2. Interest Rates Matter

Changes in interest rates can mess with JEPI’s money-making plans. If interest rates go up, the special contracts JEPI uses (ELNs) might not be worth as much, so its income could take a hit. But if interest rates go down, more people might want those ELNs, which could boost JEPI’s income.

3. The Price of Options

JEPI’s income also depends on how much those call options it sells are worth. These options get their prices from things like how crazy the stock market is (volatility), how much time is left before they expire, and whether the stocks pay dividends. If option prices drop, JEPI makes less money. But if they go up, JEPI might have to miss out on other opportunities.

4. Tax Time Matters

When you get money from JEPI, how much you pay in taxes can depend on where that money comes from. Some of it might be taxed just like your regular income, which can be pretty high in some cases. But some of it might get special tax treatment and be taxed at lower rates. It’s a good idea to keep an eye on those taxes.

5. Fees and Expenses Add Up

JEPI has a cost, like a membership fee for being in the club. This fee is called an expense ratio, and it’s 0.35%. That might not sound like much, but it can eat into your profits over time. Plus, there are other costs, like fees for making deals and managing the options, which aren’t included in that expense ratio.

6. Growth Might Be Slow

While JEPI can be like a cash machine, it might not be the fastest way to grow your money. Its focus on making money regularly could mean slower growth compared to some other investments. Also, its option strategy might not let it increase its dividends as much as other options.

How Does JEPI Compare to Other High-Yield Choices?

JEPI isn’t the only game in town when it comes to high-yield investments. There are other options like JEPQ, QYLD, SCHD, and more. Each of them has its own perks and downsides:

  • JEPQ: This one’s like JEPI’s cousin, but it tracks different stocks (the Russell 1000 Index). It has a lower fee of 0.29% and gives out more in dividends (13.4%). However, it’s less diverse, with only 50 stocks, and it’s not as popular.
  • QYLD: Here, we have an ETF that follows the Nasdaq 100 Index and uses call options, too. It has a lower fee (0.60%) and offers higher dividends (13.2%). But it’s more of a roller coaster ride and leans heavily on tech stocks.
  • SCHD: This one goes after high-quality dividend stocks from the Dow Jones U.S. Dividend 100 Index. It’s got a tiny fee (0.06%) and lower dividends (3.4%), but it’s super diverse with 102 stocks and has lots of fans.
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Remember, there are other ways to grow your money too, like buying individual stocks that pay dividends, real estate (REITs), or bonds. They all have their own good points and not-so-good points, so it’s worth doing some digging to see what fits your money goals the best.

So, is JEPI a good pick for you? Well, if you want steady income and are okay with not hitting the jackpot overnight, it could be a good match. But make sure you understand the possible bumps in the road and explore other options to see what works best for you. Happy investing!

Frequently Asked Questions

1. Is JEPI a good investment option for dividend seekers?

As of the latest report, JEPI has a dividend yield of 3.28%, which is a good return for income-seeking investors. JEPI has consistently paid out dividends since its inception, making it a reliable stock for dividend investors.

2. What are the long-term prospects for JEPI?

JEPI focuses on investing in high-quality, income-producing assets, which provides a level of stability for the company. Additionally, JEPI's portfolio is diversified across different asset classes and sectors, which provides defense against market volatility. These factors suggest that JEPI can be a good long-term investment.

3. What are the risks associated with investing in JEPI?

As with any investment, there are risks associated with investing in JEPI. Market volatility, interest rate risk, and credit risk are some of the risks with investing in equities and bonds. Additionally, JEPI's focus on income-producing assets may limit its potential for growth and capital appreciation

4. How does JEPI compare to other dividend-paying stocks?

JEPI's dividend yield is noticeably higher than that of the S&P 500, which has an average yield of 1.35%. JEPI also has a portfolio that is diversified across different sectors and industries. These factors make JEPI a more attractive investment for dividend investors.

5. Does JEPI's dividend payout ratio suggest future growth?

JEPI's dividend payout ratio is currently less than 100%, which suggests that the company is retaining some earnings for future growth. Additionally, JEPI has a track record of growing its portfolio and increasing its dividend payments. These factors suggest that JEPI could experience future growth.

6. How has JEPI performed compared to the overall market?

JEPI has outperformed the S&P 500 over the past 5 years, with an average annual return of 13.23% compared to the S&P 500's average annual return of 10.73%. JEPI's diversified portfolio and focus on income-producing assets have contributed to its outperformance.
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Hey, I'm Noah, a tech blog author specializing in writing articles on various Tech-related topics. With a strong background in digital marketing, I've witnessed firsthand how the age of the internet has revolutionized the way we consume and share information. Technology journaling allows me to explore and document these exciting advancements, keeping readers informed and inspired. Let's embark on this tech journey together!
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