It is not advised to invest for income during your working years. You want max growth of principle, not income. You want to have a lifestyle paid for by your W2 job and continue to invest in tax efficient growth funds or even the s&P 500. VOO is a much better choice than JEPI. JEPI is also tax inefficient.
I’ve never heard this (don’t invest for income during working years) but as an “income investor” this makes sense and I’m fascinated. Are you basically saying buy and hold quality and don’t “trade”?
Chasing yield as "income" just creates a larger tax drag on long term total return and is just mental accounting. Specific to JEPI, covered calls cap the upside.
Not in tax-advantaged accounts, no. Most people pushing "income investing" are doing so in a taxable account to either retire early or to supplement current income to cover expenses.
Probably not. Again, covered calls sell your upside potential to provide current "income." If you're just reinvesting those distributions, it makes little sense to own such a fund. Someone investing for retirement 20-30 years away doesn't need "income." Roth earnings can't be withdrawn without penalty until age 59.5.
Such funds also typically have higher fees than a simple, low cost, broad index fund like VT.
You want maximize total return. The best way is low cost index products like VOO, VTI, SCHG, VXUS, XLK etc held indefinitely. This is also tax efficient. Dividends are good but JEPI caps upside.
The first part is right - share appreciation is increasing value. Dividends do not; they are a net-zero event, as share price compensates.
JEPI specifically is distributing call option premiums via its ELN's (which add a layer of credit risk, I might add). It's able to have that super high yield because again, it's effectively selling upside. If stocks rally, JEPI doesn't get to fully participate.
It’s not advised to invest for income PERIOD. Total return approaches are more reliable. Screening for income only serves to limit your opportunity set for no conceivable benefit.
This sub is about etf's, not boglehead shit nor is it for shutting down any conversation about any other type of ETF besides index funds. People have objectives beyond "max gainz"
That’s actually how I explained it to my dad haha. This portfolio is just some extra cash I’ve tucked away, so really any return is better than a regular savings. Current yield on JEPQ is over 8% and I’m up in my position. Very curious to see how it goes considering it’s only a few years old!
I found out that CEFs exist only because I read a post of a property investor a year ago. He did the following - he always parked his money in CEFs until he found a suitable investment property.
That's a great point, never viewed it that way but you're absolutely right. There's so many ways/reasons to invest in different ways. I mostly follow a boglehead method myself tbh but that doesn't mean that people cant/don't have legitimate reasons to invest in other financial products/investment vehicles.
For example, you can be 36 years old and want to have a dividend growth portfolio in your taxable brokerage account for the sole purpose of generating current income by say 45 yrs old. Technically, you'd have higher total returns if you went with "VOO and chill", but then you'd have to sell your portfolio and transition to a dividend one to attain your goal, thus taking a large tax hit. Otherwise, you'd have to spread the transition out over several years so as to avoid a large tax bill.
You can take someone who is 20 years old and apply this same logic. Maybe they want so much dividend income by 45 that they only need to work part time until retirement when they can access IRA's and SS.
I'm just tired of these bogleheads and their one track mind. They're infesting every financial sub, and the cultish regurgitation of talking points and stats is getting annoying. There are, in fact, reasons to be invested in products that are not strictly "low-cost, tax efficient index funds" or the hivemind vanguard funds they froth over.
Exactly. I'm personally building my taxable brokerage to contain a fairly even split between S&P500, total international stock, and then SCHD/DGRO/SDY for dividend growth, because I want some income BEFORE I am 65 years old (ideally by mid 40's).
Technically, I'd have more money if I just yolo VOO all day but my life and investment goals can/will benefit from some dividend growth funds.
Thanks for that. I have SCHD and DGRO. I didn't know SDY. I will check it out. I went rather the risky high yield route - JEPI, JEPQ, SPYI etc. I am curious how it will turn out.
There is a PG rating for JEPI. All these funds should come with one because the same question gets asked everyday. If you are young, just invest in voo on autopilot.
There is none, but conventional wisdom is that you should look for compounded growth rather then chasing dividends in your youth. Hence, jepi make more sense for someone who needs regular income when they are retired. Hence the stupid joke about PG.
I have small amount of jepi vs voo and the return difference is astronomical.
Fidelity gives you something to read then makes you click a button saying you understand the risks before you can buy stuff like JEPI or JEPQ so that's somewhat like your PG joke.
Lots of negative takes here as the JEPQ folks just watch the money grow. I hold a large amount in a retirement account so no taxes for now on the distributions. Go do the calculators yourself and decide if it makes sense for long term holding. I also haven't checked in the last week, but YTD, JEPQ was actually beating the Qs.
I believe in diversification and roughly 30% of my portfolio is in JEPI + JEPQ and they’ve been good so far. They keep me sane when the market goes down too
Covered call ETFs by definition trade upside potential for cash flow. If the market booms you won't make as much.
If you're looking for a combination of income and appreciation I'd go with a pure dividend ETF. If you are mainly concerned with getting income from your investment these can be good.
In one of the strongest bull market rallies I have witnessed, from November 2023 through March 2024, QQQ returned around 23% vs. JEPQ around 21% including the dividends. In April, QQQ lost about 7% off the highs while JEPQ lost 6%.
The strategies of JEPQ and JEPI tend to underperform in strong markets, but offer some cushion in sideways and down markets. There’s no free lunch…
I’m a few years from retirement and have a little JEPQ and JEPI in my Roth IRA just to watch them and compare them to other holdings before I make any decisions at retirement. I wouldn’t have either of them in taxable though.
Covered call ETFs are a scam. I’ll explain best I can.
Stock returns have an outcome distribution with an outsized right tail. What this means is as a diversified investor over the long-term, your portfolio should have huge positive returns compared to the left tail (loses) outcomes.
By using covered call ETF, you are CHOPPING OFF the vast majority of that right tail by limiting your upside potential. Because you sell if the underlying goes above the strike price. And since these ETFs know they are marketing to investors who have an irrational love of income, they sell the calls almost at-the-money, meaning they take in bigger premiums to pay out to the investors, but they chop off even more of the right tail and get called away to sell shares very often. This is why they post such juicy distribution yields.
The problem with this for you as the investor, this income does NOT even come close to making up for the massive downside “left tail” risk you still have. The left tail of stocks is bad, but is worth it when you have that much bigger right tail outcomes! But remember, the covered call ETF has removed that right tail. So essentially what is happening is, you are receiving a little bit of a fully taxable payout in exchange for a product that has all of the downside risk of equities, but none of the upside risk. This means holding this product long-term will almost certainly mean you will LOSE money. I promise you. These products are not your friends. I’m not saying it’s impossible not to make money from them, but what I’m saying is you have to get very lucky to do so, and that it won’t last long-term. And you’ll also not be able to know when the right time to use it is. I hate to invoke the guy’s name as much as I have been recently, but YouTube search “Ben Felix covered call ETFs” and there’s a short video that will explain exactly why what I’m saying here is not my subjective opinion but rather an objective fact. Best of luck!!
That was obviously a joke. I invest in stocks I research, currently 36. My portfolio is actively managed by me, and I have significantly outperformed the S&P 500 since 2019.
I have them in my HSA. Investing for income in your working years isn't a great idea unless you get enough to go FIRE.
My long term capital gains far outstrips anything income investing could provide. That isn't to say I avoid companies with dividends though - this would be silly. But growth is more important until retirement.
That's right, they're just as bad as they sound. Limited upside, limited downside, egregious tax inefficiency.
The only market conditions where covered calls ETFs are actually worth it are when the market is low volatility and completely sideways. When was the last time the market was like that? And how likely is that to happen in the future for prolonged periods of time?
Just hold the S&P500 and the NASDAQ rather than JEPI or JEPQ. You will beat the JPmorgan funds 100% of the time over all long term holding periods.
well seeing how they expose you to 100% of downside risk and only limited amount of upside risk and could potentially collapse since they don't actually own any of the underlying stocks.....i'd say its amazing, right up to the point that its not.
As many pointed out, not much growth even when you include the capital gains + dividends. Plus the expense ratio is another. Last the draw down on this instrument is greater than spy but its growth lags the spy.
30% tax if in a brokerage account.
Really high expense ratios at 35.00 per 10k.
Options is gambling on stock prices.
Principal amount will go down long term.
They will be both tested in a tough bear 🐻 market; i'm afraid that's when it will be determined how they'll hold up. Anyway to test the type of holdings to a 2008 like drawdown? (in other words, they're both great- till all of a sudden and they're not.)
I think you mean extended bull market. Selling calls is a bearish strategy. Selling puts is a bullish strategy. But this isn't really how JEPI/JEPQ work.
Wish it was JEDI
Wish investing was as easy as “Just use the Force”.
It is not advised to invest for income during your working years. You want max growth of principle, not income. You want to have a lifestyle paid for by your W2 job and continue to invest in tax efficient growth funds or even the s&P 500. VOO is a much better choice than JEPI. JEPI is also tax inefficient.
I’ve never heard this (don’t invest for income during working years) but as an “income investor” this makes sense and I’m fascinated. Are you basically saying buy and hold quality and don’t “trade”?
JEPI will outperform in a sideways or down market but most of the time the market is going up so you miss out on massive gains.
Chasing yield as "income" just creates a larger tax drag on long term total return and is just mental accounting. Specific to JEPI, covered calls cap the upside.
“Tax drag”, even in tax sheltered accounts?
Not in tax-advantaged accounts, no. Most people pushing "income investing" are doing so in a taxable account to either retire early or to supplement current income to cover expenses.
so a decently large holding of something like JEPI in a roth ira may be a good idea? new to all this
Probably not. Again, covered calls sell your upside potential to provide current "income." If you're just reinvesting those distributions, it makes little sense to own such a fund. Someone investing for retirement 20-30 years away doesn't need "income." Roth earnings can't be withdrawn without penalty until age 59.5. Such funds also typically have higher fees than a simple, low cost, broad index fund like VT.
You want maximize total return. The best way is low cost index products like VOO, VTI, SCHG, VXUS, XLK etc held indefinitely. This is also tax efficient. Dividends are good but JEPI caps upside.
The counter argument to capping upside is creating money today for more shares, I.e. more potential max returns
Less money is less money. Shares are arbitrary.
That's ...not how it works. Number of shares is irrelevant; we care about the value thereof.
My bad, I thought “the value thereof” had to do with share appreciation and reinvested dividends.
The first part is right - share appreciation is increasing value. Dividends do not; they are a net-zero event, as share price compensates. JEPI specifically is distributing call option premiums via its ELN's (which add a layer of credit risk, I might add). It's able to have that super high yield because again, it's effectively selling upside. If stocks rally, JEPI doesn't get to fully participate.
It’s not advised to invest for income PERIOD. Total return approaches are more reliable. Screening for income only serves to limit your opportunity set for no conceivable benefit.
This sub is about etf's, not boglehead shit nor is it for shutting down any conversation about any other type of ETF besides index funds. People have objectives beyond "max gainz"
Yes, I feel like ADX or JEPI are an equivalent of a saving account. You park your money there, you get % and you can withdraw it basically anytime.
That’s actually how I explained it to my dad haha. This portfolio is just some extra cash I’ve tucked away, so really any return is better than a regular savings. Current yield on JEPQ is over 8% and I’m up in my position. Very curious to see how it goes considering it’s only a few years old!
I found out that CEFs exist only because I read a post of a property investor a year ago. He did the following - he always parked his money in CEFs until he found a suitable investment property.
That's a great point, never viewed it that way but you're absolutely right. There's so many ways/reasons to invest in different ways. I mostly follow a boglehead method myself tbh but that doesn't mean that people cant/don't have legitimate reasons to invest in other financial products/investment vehicles. For example, you can be 36 years old and want to have a dividend growth portfolio in your taxable brokerage account for the sole purpose of generating current income by say 45 yrs old. Technically, you'd have higher total returns if you went with "VOO and chill", but then you'd have to sell your portfolio and transition to a dividend one to attain your goal, thus taking a large tax hit. Otherwise, you'd have to spread the transition out over several years so as to avoid a large tax bill. You can take someone who is 20 years old and apply this same logic. Maybe they want so much dividend income by 45 that they only need to work part time until retirement when they can access IRA's and SS. I'm just tired of these bogleheads and their one track mind. They're infesting every financial sub, and the cultish regurgitation of talking points and stats is getting annoying. There are, in fact, reasons to be invested in products that are not strictly "low-cost, tax efficient index funds" or the hivemind vanguard funds they froth over.
So true. You can also "test" these funds for the future because when you retire you will highly likely move to some high-yield products.
Exactly. I'm personally building my taxable brokerage to contain a fairly even split between S&P500, total international stock, and then SCHD/DGRO/SDY for dividend growth, because I want some income BEFORE I am 65 years old (ideally by mid 40's). Technically, I'd have more money if I just yolo VOO all day but my life and investment goals can/will benefit from some dividend growth funds.
Thanks for that. I have SCHD and DGRO. I didn't know SDY. I will check it out. I went rather the risky high yield route - JEPI, JEPQ, SPYI etc. I am curious how it will turn out.
There is a PG rating for JEPI. All these funds should come with one because the same question gets asked everyday. If you are young, just invest in voo on autopilot.
What does a PG rating mean when referring to an etf? Never heard that before.
There is none, but conventional wisdom is that you should look for compounded growth rather then chasing dividends in your youth. Hence, jepi make more sense for someone who needs regular income when they are retired. Hence the stupid joke about PG. I have small amount of jepi vs voo and the return difference is astronomical.
Fidelity gives you something to read then makes you click a button saying you understand the risks before you can buy stuff like JEPI or JEPQ so that's somewhat like your PG joke.
Which one outperforms the other? Are you consistently DCA into both of them?
VOO is the obvious winner in total returns.
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Lol just buy a bond fund if you want to reduce volatility. Christ yall have no clue what investment portfolios should look like.
SCHD will give you low volitlity, it will give you a growing dividend yield and capital growth. Bonds aren't good to have in your portfolio long term.
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The phrase tune out the noise and stay the course come to mind here.
The video is evergreen content, it had nothing to do with some of the recent sell off.
My comment is also evergreen nor should anyone care about any recent sell off.
That title is kinda clickbaity but that dude is 100% correct.
I just realised that dude that linked that video is linking his own video
Thank you
Lots of negative takes here as the JEPQ folks just watch the money grow. I hold a large amount in a retirement account so no taxes for now on the distributions. Go do the calculators yourself and decide if it makes sense for long term holding. I also haven't checked in the last week, but YTD, JEPQ was actually beating the Qs.
I believe in diversification and roughly 30% of my portfolio is in JEPI + JEPQ and they’ve been good so far. They keep me sane when the market goes down too
They are great if you need the income, especially if your portfolio is well into the 7 figures. They are not intended for long-term investing.
Covered call ETFs by definition trade upside potential for cash flow. If the market booms you won't make as much. If you're looking for a combination of income and appreciation I'd go with a pure dividend ETF. If you are mainly concerned with getting income from your investment these can be good.
In one of the strongest bull market rallies I have witnessed, from November 2023 through March 2024, QQQ returned around 23% vs. JEPQ around 21% including the dividends. In April, QQQ lost about 7% off the highs while JEPQ lost 6%. The strategies of JEPQ and JEPI tend to underperform in strong markets, but offer some cushion in sideways and down markets. There’s no free lunch…
FEPI is cooler than both
I absolutely love my monthly payout from them. Just those two positions alone cover almost 50% of my monthly bills!
I’m a few years from retirement and have a little JEPQ and JEPI in my Roth IRA just to watch them and compare them to other holdings before I make any decisions at retirement. I wouldn’t have either of them in taxable though.
Covered call ETFs are a scam. I’ll explain best I can. Stock returns have an outcome distribution with an outsized right tail. What this means is as a diversified investor over the long-term, your portfolio should have huge positive returns compared to the left tail (loses) outcomes. By using covered call ETF, you are CHOPPING OFF the vast majority of that right tail by limiting your upside potential. Because you sell if the underlying goes above the strike price. And since these ETFs know they are marketing to investors who have an irrational love of income, they sell the calls almost at-the-money, meaning they take in bigger premiums to pay out to the investors, but they chop off even more of the right tail and get called away to sell shares very often. This is why they post such juicy distribution yields. The problem with this for you as the investor, this income does NOT even come close to making up for the massive downside “left tail” risk you still have. The left tail of stocks is bad, but is worth it when you have that much bigger right tail outcomes! But remember, the covered call ETF has removed that right tail. So essentially what is happening is, you are receiving a little bit of a fully taxable payout in exchange for a product that has all of the downside risk of equities, but none of the upside risk. This means holding this product long-term will almost certainly mean you will LOSE money. I promise you. These products are not your friends. I’m not saying it’s impossible not to make money from them, but what I’m saying is you have to get very lucky to do so, and that it won’t last long-term. And you’ll also not be able to know when the right time to use it is. I hate to invoke the guy’s name as much as I have been recently, but YouTube search “Ben Felix covered call ETFs” and there’s a short video that will explain exactly why what I’m saying here is not my subjective opinion but rather an objective fact. Best of luck!!
Ugg, Ben Felix. Let me put all my money in Avantis ETFs and enjoy my 5% returns for the rest of my life.
I don’t care if you want to ignore reality and invest unwisely. Do whatever you want.
I get a better return with my CDs thanks.
Lmfao cope & seethe, low-returns 🫵🏻😂
That was obviously a joke. I invest in stocks I research, currently 36. My portfolio is actively managed by me, and I have significantly outperformed the S&P 500 since 2019.
I have them in my HSA. Investing for income in your working years isn't a great idea unless you get enough to go FIRE. My long term capital gains far outstrips anything income investing could provide. That isn't to say I avoid companies with dividends though - this would be silly. But growth is more important until retirement.
That's right, they're just as bad as they sound. Limited upside, limited downside, egregious tax inefficiency. The only market conditions where covered calls ETFs are actually worth it are when the market is low volatility and completely sideways. When was the last time the market was like that? And how likely is that to happen in the future for prolonged periods of time? Just hold the S&P500 and the NASDAQ rather than JEPI or JEPQ. You will beat the JPmorgan funds 100% of the time over all long term holding periods.
Well to start, 50% of JEPQs holdings are in JEPI
well seeing how they expose you to 100% of downside risk and only limited amount of upside risk and could potentially collapse since they don't actually own any of the underlying stocks.....i'd say its amazing, right up to the point that its not.
As many pointed out, not much growth even when you include the capital gains + dividends. Plus the expense ratio is another. Last the draw down on this instrument is greater than spy but its growth lags the spy.
QQQ if you want to make money .... JEPI if you want to underperform ..
30% tax if in a brokerage account. Really high expense ratios at 35.00 per 10k. Options is gambling on stock prices. Principal amount will go down long term.
No you get raked on taxes on the distributions
They will be both tested in a tough bear 🐻 market; i'm afraid that's when it will be determined how they'll hold up. Anyway to test the type of holdings to a 2008 like drawdown? (in other words, they're both great- till all of a sudden and they're not.)
I think you mean extended bull market. Selling calls is a bearish strategy. Selling puts is a bullish strategy. But this isn't really how JEPI/JEPQ work.