Thoughts on JEPI?

PopTart

My 75 y/o parents are considering putting some cash into JEPI as they want some additional income and like the yield (11.49%). They have a growth section in their portfolio (a lot of FCNTX and DODGX both of which they've held for over 35 years) and are considering JEPI for the income side of their portfolio and are willing to sacrifice capital appreciation for the extra income. JEPI has some investments that I simply don't understand and I don't think my parents do either. What are your thoughts on JEPI?

Thanks in advance for any and all replies!

sma3

Seeking Alpha has several explanations of the options strategies they use. It is pretty complicated compared to funds that use simpler covered call option strategies, like JHQAX or GATEX for example. I just started digging into JEPI and do not yet understand what factors control the yield here. Covered Calls are much easier to understand.

JEPIX is JP Morgan's mutual fund with the same strategy as JEPI , open for a much longer time

During the Covid Crash ( March 2020 ) JEPIX lost 25% , similar to SP500. JHQAX dropped 14% and GATEX was down only 11 to 12%, but of course neither JHQAX or GATEX yields 11%. It is unclear how long JEPI yield will continue.

What about treasuries? Can't beat a risk free 5%!

Mark

One downside to JEPI - "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."

I thought this was a pretty good discussion of JEPI with regard to which investors it might it be appropriate for, which type of account (taxable, IRA etc.) and what to expect going forward. From Dividend Sensei on Seeking Alpha:

JEPI: This 12% Yielding ETF Is Perfect For 2 Kinds Of Investors

PopTart

Thanks for these comments! The almost 12% current yield looks appealing, but for how long? Excellent article Mark, thanks. My parents do own some treasuries and hopefully they'll buy more. A risk free 5% looks great.

Thanks!

yogibearbull

While longer-term record (2020- ) is better, JEPI has been struggling since 2022 (like most other things) with a cumulative TR -3.85% and price-return -14.78%. I don't want to start another debate on yield vs TR, BUT for JEPI, HIGH distributions have been with DECLINING NAV. But I also see ROC as zero.

Call-writing is an income generation strategy, not a capital preservation strategy.

https://stockcharts.com/h-perf/ui?s=JEPI&compare=_JEPI&id=p09055307830

PopTart

Thanks YBB! My parents are looking for yield but I think I've convinced them (with the help of MFO) to look at yield options other than JEPI.

yogibearbull

M* on covered-call funds such as JEPI,
https://www.morningstar.com/etfs/should-you-own-covered-call-etf-like-jepi