With that, I wanted to take a closer look at an ETF I’ve had a great experience with in the year I’ve owned it. I haven’t seen the growth potential I’d hoped but the higher income has more than sufficed while I wait for QQQ or JEPQ in this case, to continue making new highs.

If you’re interested to learn more directly from JPMorgan’s Website, have a look here for the prospectus, summary prospectus, and several other relevant fund metrics. If you want to see how JEPQ is behaving in my own portfolio, have a look at the Unqualified Portfolio here.

Post Agenda

• Overview
• Investment Strategy
• Expenses
• JEPQ ETF Pros & Cons
• JEPQ Investment Returns
• 3-Year Performance Data

JEPQ Overview

The JPMorgan Equity Premium Income ETF or JEPQ is an actively traded fund and invests in large-cap companies from the Nasdaq 100 index. JEPQ uses a covered call strategy to generate a higher level of income at almost 10% per year, making it very attractive for income seeking investors. Currently, the fund has approximately $21 billion in assets under management with an expense ratio at a reasonable 0.35% given the funds potential.

JEPQ Investment Strategy

JPMorgan uses a popular options strategy combining equity investments with an out of the money covered call. This approach accomplishes the goal of generating an additional income without completely ignoring capital appreciation. Short calls are entered above the current market price but at that point upside appreciation is forfeited in return for the income that is received.

I do prefer this strategy to other funds that chose to sell at the money calls. Those funds may return a higher premium but do so at the expense of any capital appreciation. I just don’t care for a fund that participates in all of the downside and none of the upside.

In any case, JEPQ uses a more conservative options approach and has performed quite well in my opinion. We’ll take a closer look in another section but in the few days of 2025, JEPQ is trading in lockstep with QQQM, the Nasdaq 100 ETF.

Expense Ratio

As mentioned previously, the JEPQ ETF has a respectable expense ratio of 0.35%. For comparison, the SPY ETF has an expense ratio of 0.09% so yes JEPQ is higher but not egregiously so. Making the expense ratio more than competitive for an actively traded fund. SPY maintains a lower expense ratio primarily because of it’s “hands-off” or “passive” approach.

There are no loading fees to speak of and like most ETF’s, no other hidden fees. Every cost is wrapped into that 0.35% expense ratio and at $35 for every $10k invested, it’s more than manageable. It’s likely, we couldn’t replicate JEPQ’s performance for any less in fees if we wanted to go about structuring a similar strategy.

JEPQ ETF Key Benefits

• Well above average dividend yield at approximately 9.7%
• Lower volatility compared to the Nasdaq-100 Index
• Diversified investment into Large-Cap Technology stocks

JEPQ ETF Key Detractors

• Capped upside due to the covered call strategy
• Higher concentration risk to Technology stocks
• Additional complexity from the options strategy

JEPQ ETF Investment Returns

Since inception JEPQ has been providing investors with a great return, including appreciation of about 12% in the past year. Additionally, as of today, JEPQ has captured about 75% of the Nasdaq-100’s upside while simultaneously generating a consistent stream of income. This combination of growth and income has attracted plenty of investors to JEPQ at this relatively early stage and will likely be a deciding factor for many other investors in the years to come.

3 Year Performance Results

Back Test Criteria:

• $5,000 Initial Investment
• $100 Monthly Contribution
• Start Date – 1/14/22

Assuming a $5,000 initial investment and $100 monthly contributions starting January 14^th, 2022 an investment into JEPQ would have become approximately $17,000 throughout the period. The total capital contribution across the 36 month period would be $8,600 for a total return of $8,400 or almost 100% in total return.

Doubling an investment in just a little under 3 years is no easy task. JEPQ has become a star performer within the options ETF space and should these metrics continue, will be well into the future also.

Final Thoughts

JPMorgan has found a winning formula with their JEPQ ETF. By combining the ability to capture upside JEPQ separates itself from other high yielding funds. Many of which not only fail to grow but actually have a decaying share price as a byproduct of their particular strategies. Not exactly a recipe for longer term success.

Still, as it is with any investment, there are good performers and not so good performers. In my opinion JEPQ falls into the better performers camp having virtually doubled an investment over the past 3 years.

At a reasonable expense ratio, approximately 75% of the Nasdaq’s growth potential, and about a 10% yield, JEPQ offers plenty for investors to like. Add to that any yield increases that may result from higher volatility in the years ahead and, I think, there are plenty of reasons to consider this high yielding ETF.

Let me know in the comments what you think of the JEPQ ETF or if another ETF has performed better. I know everyone would like to review.

Until the next post.

God bless,

Jeff

<p>The post JEPQ ETF: Capable Growth, Higher Income first appeared on UQinvest.com.</p>

In the ever-changing world of ETF’s, investors are constantly seeking opportunities to maximize their returns while also managing their risk. Two ETF’s that have garnered significant attention recently are the NEOS S&P 500 High Income ETF (SPYI) and the ProShares S&P 500 High Income ETF (ISPY). Both funds aim to provide investors with high income from the S&P 500 index, but they employ different strategies. In this article, we’ll dive into the comparison of SPYI v ISPY, exploring their similarities, differences, and potential benefits for investors.

Post Agenda

• SPYI Fund Overview
• ISPY Fund Overview
• SPYI v ISPY Strategy Comparison
• SPYI Pros & Cons
• ISPY Pros & Cons
• Risk & Volatility
• Who is SPYI Appropriate for?
• Who is ISPY Appropriate for?

SPYI Fund Overview

SPYI is an actively managed ETF launched by Neos Investments. The fund’s primary objective is to generate high monthly income for investors while maintaining exposure to the S&P 500 index. SPYI employs a strategy that involves investing in the S&P 500. These holdings earn dividends and the income is enhanced with an options strategy.

ISPY Fund Overview

ISPY, on the other hand, is a passively managed ETF launched by ProShares. This fund tracks the performance of the S&P 500 Daily Covered Call Index. They seek to provide investors with high income through a combination of equity exposure and option premium.

SPYI v ISPY Strategy Comparison

When comparing SPYI v ISPY it’s important to understand the nuances of each fund. Let’s discuss several different characteristics of to highlight how each attempts to benefit investors.

SPYI’s Strategy

SPYI’s strategy is comprised of four main components;

1. Holding S&P 500 Stocks
2. Collecting Dividends
3. Covered Call Options Strategy
4. Long OTM Call Options

The fund sells call options on the S&P 500 index to generate additional income. However, they differentiate themselves by re-investing some of those proceeds into long out of the money call options. Most covered call funds in existence simply sell the calls to increase the income but SPYI attempts to capitalize on some of the upside beyond the short call by purchasing these additional calls.

ISPY’s Strategy

ISPY employs a covered call strategy but they do it through the use of swap agreements. Strong 2008 vibes anyone? Regardless, the strategy is pretty easy to understand, they;

1. Invest in S&P 500 Stocks
2. Sell Daily Call Options on the S&P 500 Index through swap agreements

ISPY seeks to follow the S&P 500 Daily Covered Call Index while also returning investors an above average income. Additionally, ISPY may receive dividends from their holdings. In all, the strategy is mostly straightforward, ignoring any risk from those swap agreements, the fund aims to generate a consistent income by selling covered calls on a daily basis.

SPYI Pros & Cons

No comparison would be complete with out a succinct list of pros and cons for a potential investor to consider. Below I’ve provided what I believe are several of the most important items for consideration.

Pros

1. Active Management could allow for future optimization
2. Additional upside participation, beyond the short call
3. Consistent monthly income
4. Tax Efficiency through the use of Index options
5. Diversified approach

Cons

1. Higher expense ratio – 0.68%
2. Additional complexity and management error
3. Limited historical data
4. Potential for underperformance
5. Reliance on the options market

ISPY Pros & Cons

Some of the factors affecting or contributing to SPYI are also present with ISPY. Both funds seek similar objectives, only through a different approach. The most notable, in my opinion, are listed below.

Pros

1. Lower expense ratio – 0.55%
2. Simpler Options Strategy
3. Stronger initial performance
4. Potential for lower volatility
5. Passive management may appeal to some investors

Cons

1. Swap agreements make me uncomfortable
2. Limited historical data
3. Less flexibility with passive management
4. Higher portfolio turnover from daily call options
5. Dependent on the S&P 500 Daily Covered Call Index

Risk & Volatility

To fully compare SPYI v ISPY, risk and volatility are important factors to consider. From a volatility perspective, ISPY exhibits slightly higher volatility day-to-day. As of this writing, ISPY has a daily average range of $.45 where as SPYI has a daily average range of $.39. Not a significant difference but certainly something to keep an eye on.

Neither fund is without it’s risk. Chief among those risks is the limited historical data available for both funds. Ideally, I think we’d all prefer to see how they perform during a bear market before contributing our limited capital. Still, from a return perspective, it’s hard to ignore ISPY’s commanding lead. As of tonight, ISPY has returned north of 12% in price appreciation compared to SPYI’s sub 7%.

In all honesty, no one knows how either fund will perform when the market eventually does roll over. Neither has been in existence long enough for this valuable data. On the surface, an argument could be made that additional income will buoy these funds compared to their growth focused peers. A feature both funds are eager to promote, but with such limited data the jury is really still out on how either ETF will perform.

Who is SPYI Appropriate for?

• Investors seeking income through active management
• Investors seeking income through options
• Investors wanting additional upside in a bullish market environment
• Investors prioritizing consistent monthly income

While each investor is different, I think these are some of the more important features for consideration.

Active management could be debated at length but the upside is a more flexible approach. Sure, this flexibility could lead to other problems but it could also lead to solutions to problems so I guess that knife always cuts both ways.

In all, SPYI is probably more suitable to someone wanting complete transparency. Their approach just seems more clear and isn’t clouded by whatever fully constitutes a swap agreement. Though, similarly, the strategies SPYI employs may be reason enough to avoid them just the same.

Who is ISPY Appropriate for?

• Investors preferring passive index based strategies
• Investors preferring more traditional covered call approach
• Investors seeking a lower expense ratio
• Investors prioritizing consistent monthly income

If you’re seeking a passive approach and wanting to avoid the cost of long out of the money options then ISPY could make sense. I personally feel more aligned with SPYI but I also hold ISPY. If you’re interested to see how each of these holdings is performing for me you can view my Unqualified Portfolio here.

Still, to date, ISPY has performed significantly better than SPYI and they also boast a lower expense ratio, I don’t see how anyone would argue with that.

Final Thoughts

Well that about wraps up our SPYI v ISPY comparison. Honestly, it’s getting confusing keeping up with all the new offerings in the income investment space. These two ETF’s specifically, confuse me on almost a daily basis given the similar symbols.

Regardless, I hold both investments and don’t have plans to dump either of them at this time. Both have provided a consistent and similar income. SPYI has returned slightly more in income but they’ve also performed slightly worse overall, so by total return ISPY is performing better.

In closing, to determine which ETF is more appropriate for you would come down to the features you prefer. If you want a lower expense ratio then ISPY is the clear winner. Should you prefer a higher level of income then I think SPYI is more acceptable. If you’re seeking higher total returns, you should probably consider other alternatives first, but in the SPYI v ISPY debate, ISPY is the winner.

God bless,

Jeff

<p>The post SPYI v ISPY: 1 Clear Winner between Two High-Income ETF’s first appeared on UQinvest.com.</p>