TSLY vs. JEPI: Tesla-Linked Monster Yield or Tax-Efficient Income?

It’s fine for passive income seekers to pick individual stocks, but there are also excellent dividend opportunities with exchange traded funds (ETFs). Two funds that feature highly attractive yields are the YieldMax TSLA Option Income Strategy ETF (NYSEARCA:TSLY) and the JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI).

If you’re bullish about Tesla (NASDAQ:TSLA) stock, then you’ll definitely want to check out the TSLY ETF. The experts’ predictions for Tesla stock vary widely, and there are definitely risks involved. However, as we’ll discover in a moment, the potential rewards are huge for the YieldMax TSLA Option Income Strategy ETF.

In contrast, the JPMorgan Equity Premium Income ETF could de-risk your portfolio somewhat while still providing a sizable dividend yield with possible tax advantages. And if you’re careful about it, you might be able to combine TSLY and JEPI for a balanced mix of high-yield champions.

TSLY: Big Monthly Cash Payments

First things first: If you expect Tesla stock to shoot to the moon in the coming months, you might just want to buy TSLA shares. That’s because the YieldMax TSLA Option Income Strategy ETF uses an income-generating strategy that limits TSLY’s share-price upside potential.

It might surprise you to learn that the YieldMax TSLA Option Income Strategy ETF doesn’t directly invest in Tesla stock shares. Instead, TSLY uses options to synthetically participate in the ups and downs of TSLA stock.

Then, the YieldMax TSLA Option Income Strategy ETF writes/sells covered calls to generate income. This strategy allows the TSLY ETF to provide large cash payments to the shareholders. Not only that, but the fund distributes the payouts on a monthly basis.

Benefits and Risks of TSLY

At the same time, writing covered calls means that the share-price upside movement potential is limited for the YieldMax TSLA Option Income Strategy ETF. Consequently, Tesla stock could go on a rocket ride but the TSLY ETF would probably only move moderately higher.

This helps to explain why the past share-price performance of the YieldMax TSLA Option Income Strategy ETF hasn’t been great. The fund’s upside movement is limited when Tesla stock shoots higher, and TSLY can decline sharply when TSLA stock goes down.

There are some benefits associated with the YieldMax TSLA Option Income Strategy ETF, though. First of all, the TSLY ETF invests in U.S. Treasury bonds, which could unlock extra yield.

Furthermore, the YieldMax TSLA Option Income Strategy ETF pays out cash distributions each and every month. The biggest attraction of TSLY, however, it its massive annual distribution rate of 60.68%.

Just be aware of the risks associated with this fund. The share-price upside of the YieldMax TSLA Option Income Strategy ETF is limited by the covered call strategy. Plus, TSLY could decline quickly if Tesla stock falls. Additionally, annual expenses totaling 1.04% are automatically deducted from the fund’s share price.

JEPI: Steady Broad-Market Exposure

Maybe you’re not quite prepared to accept all of the YieldMax TSLA Option Income Strategy ETF’s risks. Yet, you may still want big yield. In that case, you’ll want to take a look at the JPMorgan Equity Premium Income ETF.

The long-term chart of the JEPI ETF speaks volumes. There have been ups and downs, but overall, the share price has remained fairly steady over the years.

Why is the JPMorgan Equity Premium Income ETF such a “steady Eddie” fund? It’s because JEPI doesn’t only focus on Tesla stock and U.S. Treasury bonds like TSLY does.

Indeed, the JPMorgan Equity Premium Income ETF has 125 stocks in its holdings. You’ll find technology titans like Microsoft (NASDAQ:MSFT), payment powerhouses like Mastercard (NYSE:MA), retail giants like Walmart (NYSE:WMT), food purveyors like McDonald’s (NYSE:MCD), and more.

Low Fees and Tax Efficiency With JEPI

For all of this broad-market exposure, the JPMorgan Equity Premium Income ETF only deducts 0.35% worth of annual expenses from the share price. This compares favorably to the 1.04% that the YieldMax TSLA Option Income Strategy ETF deducts annually.

Like the TSLY ETF, the JPMorgan Equity Premium Income ETF writes/sells covered calls to produce income. Currently, the JPMorgan Equity Premium Income ETF offers a 12-month rolling dividend yield of 8.13%.

This isn’t as massive as the 60.68% annual distribution rate that the YieldMax TSLA Option Income Strategy ETF features. Nonetheless, JEPI’s 8.13% yield should appeal to safety-minded income collectors, and it’s also a monthly income source.

Moreover, the JPMorgan Equity Premium Income ETF may provide tax advantages to the shareholders. As JPMorgan (NYSE:JPM) explains, the JEPI ETF distributes “all monthly income from dividends and options premium.”

This income is “treated as coupons rather than gains so that capital isn’t returned to shareholders.” You’ll want to consult with a qualified tax expert for guidance on this, but the JPMorgan Equity Premium Income ETF could enable tax benefits to boost your bottom line.

Combining TSLY and JEPI

On the surface, it appears that the YieldMax TSLA Option Income Strategy ETF and the JPMorgan Equity Premium Income ETF are totally incompatible. After all, TSLY aims for gigantic yield but entails major risks, while JEPI provides more diversification and stability.

However, if you have room in your portfolio, there’s nothing preventing you from giving both of these funds a try. To begin, you could buy some shares of the JPMorgan Equity Premium Income ETF for broad-market diversification.

Then, you could add a few YieldMax TSLA Option Income Strategy ETF shares for a yield boost and indirect exposure to Tesla stock. It’s a way to pursue eye-catching yield while also de-risking your portfolio somewhat — a potent two-fund combo for today’s income-focused traders.

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