Adding JEPI & JEPQ to my 3 ETF Portfolio (Best Monthly Dividend ETF!)

The podcast discusses JEPI and JEPQ, two JP Morgan ETFs focused on generating high monthly dividends through covered call options strategies. The ETFs differ in their underlying index exposure, with JEPI tracking the S&P 500 and JEPQ tracking the NASDAQ 100, impacting their dividend yield and volatility. The speaker recommends these ETFs primarily for Roth IRA accounts near retirement due to their high dividend yields and tax implications in taxable accounts, suggesting alternative strategies for building portfolios during younger ages.

ETF Dividends & Yields

• 00:00:11 JEPI and JEPQ offer high monthly dividend yields, significantly higher than similar ETFs like SCHD or VYM, potentially allowing for early retirement through passive income. JEPI typically has a 7-9% yield, while JEPQ's yield is often around 10% or more due to its tech focus and higher volatility. Combining the two ETFs offers an average 12-month rolling dividend yield of approximately 8.54%.

ETF Underlying Exposure

• 00:02:15 JEPI tracks the S&P 500, offering diversified exposure to large-cap US companies across various sectors, leading to a lower-risk profile and broader market exposure. JEPQ tracks the NASDAQ 100, focusing on large-cap non-financial US companies, primarily in technology, resulting in higher growth potential but also increased volatility compared to JEPI.

Covered Call Strategy

• 00:02:51 Both ETFs utilize a covered call strategy to generate their high monthly income, involving selling call options on their holdings. This approach provides additional income but also limits potential share price appreciation. JEPI has a more conservative strategy due to its diversified holdings, while JEPQ's tech-heavy portfolio leads to higher income potential but greater volatility.

ETF Performance & Volatility

• 00:06:16 JEPI exhibits lower volatility due to its S&P 500 holdings, making it more resilient during market downturns. JEPQ, tracking the NASDAQ 100, has higher volatility, potentially leading to larger gains but also greater losses during market declines. Both ETFs are relatively new, launched in 2020 and 2022 respectively, limiting historical data for assessing long-term performance.

Suitability & Portfolio Allocation

• 00:07:58 JEPI is suitable for income-focused investors seeking stable dividends with lower volatility and broader market exposure. JEPQ is a better fit for investors comfortable with higher technology exposure and who can tolerate greater volatility for potentially higher income. The speaker suggests allocating these ETFs primarily within Roth IRAs, especially closer to retirement, due to tax implications within taxable accounts and suggests other strategies for younger investors building their portfolios.