Key insights
- The article suggests that the JPMorgan Equity Premium Income ETF (JEPI) is attractive for income-focused investors, especially in volatile markets. JEPI's low-volatility stock portfolio and covered call strategy aim to provide stable income, potentially outperforming in downturns but underperforming in bull markets. This could signal a defensive shift in investor preference towards income-generating assets amid market uncertainty.
The JPMorgan Equity Premium Income ETF (JEPI 0.47%) was one of the unquestioned winners of the 2022 bear market. While the Vanguard S&P 500 ETF was losing more than 18% that year, JEPI fell only 3%. Its focus on low volatility helped it to avoid a lot of the broader market's downside risk, but the high yield, which often times was 10% or higher, was the bigger draw.
Today's environment looks like a similar setup. Low volatility stocks are doing well again. Covered call income may be more stable than bond income. In short, it's time to reconsider the JPMorgan Equity Premium Income ETF again.
JEPI uses a defensively tilted portfolio of low volatility stocks as its foundation and then writes out-of-the-money covered calls on the S&P 500 for income. The fund's yield can fluctuate with market conditions and volatility, but it's often 8% or higher.
The monthly income component is the big selling point. JEPI offers predictable income without taking excessive equity risk. The low beta portfolio and covered call overlay mean it has the potential to outperform in challenging markets, but usually underperforms in bull markets.