Why I Believe JEPI and JEPQ ETFs Are Still Strong Investments Despite a Weak Stock Market

The ongoing stock market volatility has got investors worried. The market sentiment is down and some of the top tech stocks seem steadily dropping. For a retail investor, this is a sign to look for low-risk investment options and if you want to achieve high portfolio diversification, exchange-traded funds can be your best bet.

There are several ETFs you can consider investing in and JPMorgan is known for some of the best-performing ETFs. However, if you are a high-yield investor, you might want to consider the JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) and the JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ). These two ETFs are an ideal choice despite a weak market sentiment. 

How do JEPI and JEPQ work?

Firstly, investors need to understand how JEPI and JEPQ work. JEPI invests in the top S&P 500 stocks which have low risk and steady returns while JEPQ invests in Nasdaq 100 stocks with low volatility. They are both covered call ETFs and they invest in equity-linked notes. These funds do not work like many other covered call ETFs. They sell call options on an index and earn a premium through it. The actively managed fund combines written call option exposure and equity exposure in a stock.

JPMorgan Equity Premium Income ETF

The JPMorgan Equity Premium Income ETF is an actively managed fund that offers a monthly payout. This fund invests in blue-chip U.S. stocks and has a dividend yield of 7.5%. JEPI has an NAV of $57.14 and while it has remained flat for the past year, it has soared 14% in the past five years. The fund invests in 130 stocks and has an expense ratio of 0.35%. 

Since the fund focuses on elite names that pay dividends, it ensures a steady income for investors even when the market is down. This makes it an ideal option for those looking to handle volatility. The fund’s top holdings include The Progressive Corporation, Visa Inc., Mastercard Inc., Abbvie, and The Southern Company. Several of its holdings have shown steady annual gains besides the dividend payouts. 

JEPI has generated a 12-month rolling dividend yield of 7.34%. Its holding includes:

• Information Technology: 14.3%
• Financials: 14%
• Healthcare: 12.6%
• Industrials: 12.2%

It has a balanced portfolio which also includes some of the magnificent Seven including Amazon, Microsoft, and Nvidia. 

JPMorgan Nasdaq Equity Premium Income ETF

The JPMorgan Nasdaq Equity Premium Income ETF has 108 stocks and a record 12-month rolling yield of 10.12%. Compared to savings accounts and treasury bills, this yield is significantly higher and speaks about the strength of its holdings. It invests in Nasdaq 100 stocks and has an expense ratio of 0.35%. 

JEPQ has a tech focused portfolio and its holdings include:

• Information technology: 39.5%
• Other: 16.7%
• Communication services: 12.8%
• Consumer discretionary: 12%

Some of its top holdings are Nvidia, Apple Inc., Microsoft Corporation, Amazon, and Alphabet Inc. In contrast to JEPI, the Magnificent Seven are this fund’s top holdings which means it is heavily focused on the tech sector. The current dip in tech stocks has impacted the returns on this fund. Since it invests in Nasdaq 100, this fund will always be tech-heavy.

It is an ideal ETF for those who prefer steady passive income over long-term capital gains. It has an NAV of $51.61 and since it generates a high yield, investors must keep in mind that the capital appreciation will be limited. The ETF is down 8.30% year-to-date and down 3.66% in the year. 

Steady yields and ultimate diversification 

By investing in JEPI and JEPQ, you can get the best of both, S&P 500 and Nasdaq 100. Since the funds pick elite stocks, there will be low risk and a high reward ratio. Your portfolio will not suffer in case of a drop in the index because of the ultimate diversification.

Even if both indices move sideways in the near term, you will enjoy a high yield and generate a stronger return as compared to returns generated through individual stocks. Even if the ETFs maintain the current yield, you will see stronger returns than investing in individual stocks. Both the ETFs have the potential to move higher once the market improves.

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