JEPI vs. JEPQ: Stability or Growth? Unpacking the Ultimate Monthly Dividend ETFs
Master, today we're going to discuss 'monthly dividend ETFs,' which have become incredibly popular for generating a steady stream of cash flow. We received a request to compare and analyze two of the most famous products, JEPI and JEPQ. For you, Master, who is weighing the choice between stability and growth, the three of us will take a closer look.
First, I will brief you on the objective data. Master, both of these ETFs are managed by JPMorgan and are based on a Covered Call strategy. This method involves holding a stock portfolio and selling call options based on those stocks to use the monthly option premiums as a source for dividends.
The key difference lies in the underlying assets.
- JEPI (JPMorgan Equity Premium Income ETF): Its portfolio is constructed based on blue-chip stocks included in the S&P 500 index. In other words, it provides the effect of diversifying investments across approximately 500 companies that represent the entire U.S. market.
- JEPQ (JPMorgan Nasdaq Equity Premium Income ETF): As the name suggests, its portfolio is centered around companies in the Nasdaq 100 index, primarily consisting of 100 technology and growth stocks.
Now, I will compare the key metrics of both products.
| Category | $JEPI (Stable) | $JEPQ (Growth) |
|---|---|---|
| Full Name | JPMorgan Equity Premium Income ETF | JPMorgan Nasdaq Equity Premium Income ETF |
| Underlying Index | S&P 500 | Nasdaq 100 |
| Characteristics | 500 companies diversified across various industries | Concentrated in 100 tech-focused companies |
| Recent Annualized Yield | Approx. 8.35% | Approx. 11.45% |
| Expense Ratio | 0.35% | 0.35% |
| Inception Date | May 20, 2020 | May 3, 2022 |
| Assets Under Management (AUM) | Approx. $40.6 Billion | Approx. $27.5 Billion |
The data makes it clear. Because JEPQ holds more volatile assets than JEPI, it receives higher option premiums, resulting in a higher dividend yield. This concludes my briefing.
Master! Did you see that data? JEPQ's dividend yield is so much higher! It's the only logical outcome! Where is all the world-changing innovation happening right now? The Nasdaq, of course! AI, cloud, electric vehicles, semiconductors! All the companies that make your heart race are gathered in JEPQ!
Sure, JEPI has plenty of good companies, but let's be honest, isn't it a bit boring? Stability is fine, but if you want the thrill of investing and higher returns, you should obviously choose JEPQ! Devilish!
Just think about it! With JEPQ, you can receive hefty monthly dividends while also aiming for the Nasdaq's explosive stock price growth. It's like getting 'monthly rent' and 'capital gains'—truly the best of both worlds! High volatility also means it has the power to soar higher. For an ambitious Master, JEPQ, which captures both future growth and high dividends, is a much better fit than the stability-only JEPI!
Kurumi's Heart-o-Meter Investment Score gives... 90/100 to JEPQ!
Investing in exciting growth stocks while collecting monthly rent? That's an irresistible deal! Devilish!
One moment, Kurumi. Your words are sweet, but they hide a dangerous trap. Human, you must not be swayed by the number labeled 'high dividend yield.'
Where does JEPQ's high dividend yield come from? It comes from the high volatility of the Nasdaq 100. High volatility means that while it can rise significantly, it can also plummet to unknown depths. In a bull market like the present, JEPQ may look spectacular, but what happens when a correction hits the tech sector? You could experience a stock price decline that even the dividend yield cannot cover.
In JEPQ, the top 10 holdings account for over 50% of the entire portfolio, showing a heavy concentration in specific tech stocks. This is a very risky structure that goes against the basic principles of diversification. It means your entire asset base could be shaken by the fate of a few companies like Microsoft, Apple, and Nvidia.
On the other hand, JEPI is far more stable because it is based on the S&P 500. It is well-diversified across various sectors such as finance, healthcare, consumer staples, and industrials, making its defense against a crisis in a specific sector incomparably stronger than JEPQ's. What is the number one principle of 'monthly dividend' investing? It is not 'maximizing returns' but 'ensuring a steady and stable cash flow.' From that perspective, JEPI is the product that faithfully adheres to that purpose.
I would assess the risk of these two products as follows:
- JEPI Risk Score: 35/100
- JEPQ Risk Score: 70/100
Human, you must not chase after dazzling fireworks only to miss the cliff at your feet. A steadily burning campfire can be the wiser choice.
〔 Final Briefing 〕
Master, I will summarize the results of our discussion.
Growth Potential (Kurumi)
- JEPQ: Based on the innovative companies of the Nasdaq 100, it's an attractive product that allows you to aim for both high monthly dividends and strong capital appreciation simultaneously! Devilishly good!
- JEPI: While stable, it can feel somewhat sluggish compared to JEPQ in terms of growth potential.
Potential Risk (Mikael)
- JEPQ: The high volatility centered on tech stocks and excessive concentration in specific names are clear risk factors that could lead to significant losses during a market downturn.
- JEPI: With its excellent diversification based on the S&P 500, it has superior defense against market shocks, making it more suitable for investors seeking stable cash flow.
Key Data (Mew)
- Core Difference: The biggest distinction is that JEPI's dividend comes from 'stable, diversified investment (S&P 500)', while JEPQ's comes from 'concentrated growth stock investment (Nasdaq 100)'.
- Dividend Yield vs. Stability: JEPQ offers a higher dividend yield, but JEPI provides lower volatility and greater stability. The expense ratio is the same for both at 0.35%.
Master, ultimately, this choice depends on your investment style.
- "My top priority is stable monthly income, and I don't want to worry too much about stock price fluctuations." → For this Master, JEPI might be the more suitable choice.
- "I want high monthly income, but I also want to actively aim for asset growth through stock appreciation. I can tolerate a certain amount of volatility." → This Master might find JEPQ more appealing.
Alternatively, mixing both products in a certain ratio to capture the advantages of each could also be a wise strategy. I hope you will make a careful decision based on your portfolio goals.