They only use 20% of assets for CCs. They also do OTM with ELNs which protect them from losses. I’m retired on 25% JEPI, JEPQ, QQQM, VOO. Have yet to sell one share. Just keep adding with leftover dividends.
Right well options are leveraged positions so that's all they need to create a full position. I fear you have a lot of concentrated exposure to US tech risk and that may go south on you at some point, but I wish you the best of luck. I would strongly suggest talking to a financial advisor and getting a second opinion on that positioning to make sure it's aligned with your objectives.
The premise of this video is a bit off. The whole point of a less volatile, large dividend yield investment is to provide cashflow right now. It is for people who need it now. That is people who are retired or for whatever reason needing constant cash flow. But this video mostly talks about young people who are in the growth phase of their investing life. Retirees were only shortly mentioned. It should have been the other way around. 98% of the video should have been comparing this to other retiree cashflow options, and then there should have been just a short mention that this is not for the young. I am comparing different cashflow options and watched this video to see how this ETF would fit in to my portfolio. The video really had nothing to give.
I'm sorry you feel that way but I appreciate the honest and well thought out feedback. The first half of the video was comparing it to bonds (the most common income investment) from the perspective of a retiree. I spent a little time on comparing it to the S&P because some young people use it. Then at the 10 minute mark I showed a better way to generate retirement income. If you're not considering bonds, what other retiree cash flow options are you looking at?
@@FundamentalsofFinance Certainly. My point is that when talking about a specific ETF product, I would think the main comparison would be against other similar products, dividend ETF:s in this case. If your video had been about dividend ETF:s in general against other types of ETFs, then I would agree more with you, then the investment category would be compared with other investment categories. But if we are talking about a single ETF of a very specific category, one would assume that the person thinking about it has already decided that his portfolio needs a dividend yielding portion and then he'd like to find out if this particular fund would be one to choose. Or this is at least how I view it. First a person decides what category he wants, and then he wants to compare specific choices in that category. Now I watched this knowing I need a dividend ETF in my portfolio and I wanted to know how this would compare to other options.
It seems to me that if one is looking for a higher yield than bond funds and has no problem with short/mid term high volatility as long as the income is stable and the asset price appreciates more than inflation in the long run, then JEPI and JEPQ seem to be pretty good choices. On the other hand, if one is looking for stability of asset price like bond funds or asset appreciation as good as SPY or QQQ, then JEPI and JEPQ are not good choices.
Great video! I'm a few months away from retirement and currently have 20% of my equities PF in JGPI (EU version of JEPI). I totally understand the reason not to like these kind of ETFs, but I've added it anyway. In retirement I will not re-invest dividends in JGPI - it will be used to pay bills or re-invested in a developed markets dividend ETF. From a psychological perspective I just prefer dividends so I am also for 20% invested in REITs. Rest is a mix dividend stock and ETF's in all sectors and regions. In the Netherlands bonds and equities are taxed very high (2%). With taxes that high, bonds are just not an option IMO. You are basically guaranteed to lose against inflation. My fail safe is my pension that I can start early if I want. In a market crash I start my pension early and that will cover more than my current expenses without the need to sell stocks. My take away is that JEPI/JGPI might be okay(ish) for a retiree with a diversified PF that has a guaranteed income stream when the SHTF :)
Yeah totally. It's not your whole portfolio and it sounds like you're going to reinvest some of the dividends (even if reinvesting in a different strategy it still counts in my book). I'm not sure how that 2% tax works exactly but with rates where they are it's probably not that different in the US. For taxable bonds we pay whatever our max tax bracket rate is on the income, which includes state and federal tax. For me that's nearly 50%. So, on a short-term bond paying ~4.5% I'll be paying a little over 2% in taxes.
@@FundamentalsofFinance For taxes on wealth there is no progressive tax system or difference in how short or long bonds/equities are taxed. System in the Netherlands is paying 36% tax on an expected yield of 6% on your wealth (a bit more than 2%). So unrealized gains. You could even lose wealth in a year and be taxed as if you have made 6%. This has now been overruled by a court so you can protest and go the realized gains route. For real estate (that I own as well) they still follow the unrealized gains method. We are paying more taxes on wealth than the very left wing French economist Piketty suggests. 🤷♂
Kindly go into more details about the average 2% monthly upside. Another TH-camr kept showing a chart that JEPI uses 30 days 5 to 10% Out-of-the-Money Covered Calls.
No problem. With respect, that TH-cam has no idea what he or she is talking about because JEPI doesn't write covered calls at all. If you go to its web page and download its holdings, you can see that they use equity linked notes to mimic the exposure of the call options. You can't tell what they are from looking at them, like you could with an actual option contract. They describe their process in more detail in the prospectus. My information comes from an interview that Morningstar did with the portfolio managers of JEPI. They said they target 30 delta out of the money calls, which means 30% chance of expiring in the money. Historically, that's been around 2% above the existing price since the inception of the fund. It'll be a little higher when volatility is high and a little lower when volatility is low. Looking back at the monthly return over the past 3 years, it's exceeded 5% only 3 times out of 36. That includes the income. It doesn't own the same portfolio as the S&P so it can do better or worse than the S&P in any given month, but if the calls were 5-10% out of the money it would have likely had a lot more big up months than that. SPY has exceeded 5% in 9 of those 36 months.
Unfortunately, you seem very negative about covered call ETFs. If you compare bond income over the last 5 years with JEPI, you might gain a different perspective. It seems you compare it to the S&P 500 and refer to bonds when it suits you. That's not very consistent.
The last 5 years is not predictive of the next 5 years. You're capturing an unusually great stock market and the worst bond market in history. My point was that jepi is NOT an alternative to bonds. I'm trying to explain how it'll likely to work in different market environments over time since most investors just see the last few years and assume that's what they'll always get. Unfortunately that's not realistic.
Yes, while I can't say whether or not it's perfect for your specific situation, it seems like a generally reasonable portfolio for someone in retirement.
The question though is: Wouldn't it make sense in Retirement to rely on a CC ETF like JEPI? Given that it returns between 7% and 12% per year in premiums? What do I care at this point if the NAV goes down by, lets say 10-15% but only slowly rises (because of the cap)? If you choose such ETF I assume you are not planning to sell shares? Lets say I would (Retirment) invest in Bonds or pure Dividend ETFs: sure, Bonds give a bit more security, however for the trade-off of lower income. If the dividend ETF (like FTSE All World High Div Yield) risis by 10% in NAV: what's my benefit of it if I dont want to sell?
It matters because the yield is a % of the NAV. So, if you have a steady 10% yield not your NAV is falling over time, you're actual income in $ will be falling over time. There are certain much worse options than JEPI out there but imo it is still not a strategy that is likely to produce a sustainable growing income stream over time, which is what you need if you want to rely on it in retirement.
JEPI and JEPQ are meant for people with low income. If you struggle with bills and have no debt this is perfect. It will allow you to build up a next egg without killing your budget. Then, when you have enough income, you can start to diversify. Your perspective on these types of stocks is more geared for people with a large income. Pretend you only make the medium wage. Look at realistic rent in your area and see if your investment strategies will work for the average person.
These reviews apply equally to everyone as the ETF's results will be the same regardless of your income level. I would say the people I'd most like to help are the ones with limited financial backgrounds and that isn't really impacted much by their education or income level. Investing isn't really taught anywhere. But those are the people we started the channel for and the people who are most vulnerable to falling into traps based on false promises made by other TH-camrs. Sadly, most of them don't really understand investing either.
@FundamentalsofFinance i am not a financial advisor like you are, but I do help a lot of people in real life learn how to invest. From my experience, the traditional way you advocate is to slow for most people to get excited. I use Jepi and Jepq as a more stable way to show the power of investing. Once they get that first dividend, they get super excited. Then, when they want to upgrade their investing skills, I point them to channels like yours.
I don't see how JEPI could make extra income over a period of say two years in a falling market if it can only take extra income from share price growth.
The income comes mostly from selling call options so it will be there no matter what the share price does but yes over time it will likely shrink. You can only sell covered call options on the assets you have in your portfolio (otherwise it's not covered). If the value of the underlying investments is going down, the income it pays out will also go down over time. And you are right, it's once there's a falling market that you'll really see that.
Bnd can't touch new ETFs like High Cshi Jaaa Think of jepi and its kind as a growth and income segment of a portfolio, not growth and not protection types. Examples Sector tilt: vgt smh xlk Aggressive growth: qqqm schg Growth: voo spmo xmmo Growth and income: jepi schd jepq Income: svol fepi Protection: jaaa cshi
@@FundamentalsofFinance I do think that one use case for JEPI and JEPQ funds that you did not cover which I would consider valid is the retiree. Who simply wants a monthly retirement flow of income and for the fund (over time) to beat inflation (which the .65 beta will do). I am not sure that using a growth versus growth comparison to SPY/SPX is the best comparison for all use cases. This person, of which I am one, does not functionally care about top line growth, but cares much more about getting 6-8% and growing the price enough to stay ahead of inflation. Of course, this assumes that one has a well round portfolio and this is only part of their strategy. Just my two cents and a very nice video. I should have mentioned that on the first comment. Sorry
@@FundamentalsofFinance Great knowledge, script, and well put together. Just seeing your head move every 5-10 seconds is a bit distracting for me to watch all the way through.
Lol everyone has different objectives but one might say the same thing about covered calls. They cap your upside to generate income... who usually prioritizes income over long-term growth? Old people lol. Btw I made a 100% return in just over a year in TMF from early 2019 to 2020. That's a bond ETF. So they're not all boring lol.
The important key point he makes is that you reinvest your dividends and capital gains. You do not use them for income. When you need income, you sell some of the investment itself. This is a much better approach.
Agree. Take only what you need and create your own income stream that mimics a salary, rather than being inconsistent and potentially dwindling down over time. An 8+% yield is not sustainable no matter how you decide to take it out.
Continue the investment conversation here👉: discord.gg/3RqkJcQqbq
Appreciate your common sense advice and willingness to criticize other TH-cam “Finfluencers”. You got my sub, keep it up!
Thank you!
They only use 20% of assets for CCs. They also do OTM with ELNs which protect them from losses. I’m retired on 25% JEPI, JEPQ, QQQM, VOO. Have yet to sell one share. Just keep adding with leftover dividends.
Right well options are leveraged positions so that's all they need to create a full position. I fear you have a lot of concentrated exposure to US tech risk and that may go south on you at some point, but I wish you the best of luck. I would strongly suggest talking to a financial advisor and getting a second opinion on that positioning to make sure it's aligned with your objectives.
Well done! Very easy to understand.
Thank you
The premise of this video is a bit off. The whole point of a less volatile, large dividend yield investment is to provide cashflow right now. It is for people who need it now. That is people who are retired or for whatever reason needing constant cash flow. But this video mostly talks about young people who are in the growth phase of their investing life. Retirees were only shortly mentioned. It should have been the other way around. 98% of the video should have been comparing this to other retiree cashflow options, and then there should have been just a short mention that this is not for the young. I am comparing different cashflow options and watched this video to see how this ETF would fit in to my portfolio. The video really had nothing to give.
I'm sorry you feel that way but I appreciate the honest and well thought out feedback.
The first half of the video was comparing it to bonds (the most common income investment) from the perspective of a retiree. I spent a little time on comparing it to the S&P because some young people use it. Then at the 10 minute mark I showed a better way to generate retirement income.
If you're not considering bonds, what other retiree cash flow options are you looking at?
@@FundamentalsofFinance Certainly. My point is that when talking about a specific ETF product, I would think the main comparison would be against other similar products, dividend ETF:s in this case. If your video had been about dividend ETF:s in general against other types of ETFs, then I would agree more with you, then the investment category would be compared with other investment categories. But if we are talking about a single ETF of a very specific category, one would assume that the person thinking about it has already decided that his portfolio needs a dividend yielding portion and then he'd like to find out if this particular fund would be one to choose. Or this is at least how I view it. First a person decides what category he wants, and then he wants to compare specific choices in that category. Now I watched this knowing I need a dividend ETF in my portfolio and I wanted to know how this would compare to other options.
It seems to me that if one is looking for a higher yield than bond funds and has no problem with short/mid term high volatility as long as the income is stable and the asset price appreciates more than inflation in the long run, then JEPI and JEPQ seem to be pretty good choices. On the other hand, if one is looking for stability of asset price like bond funds or asset appreciation as good as SPY or QQQ, then JEPI and JEPQ are not good choices.
Great video!
I'm a few months away from retirement and currently have 20% of my equities PF in JGPI (EU version of JEPI). I totally understand the reason not to like these kind of ETFs, but I've added it anyway.
In retirement I will not re-invest dividends in JGPI - it will be used to pay bills or re-invested in a developed markets dividend ETF.
From a psychological perspective I just prefer dividends so I am also for 20% invested in REITs. Rest is a mix dividend stock and ETF's in all sectors and regions.
In the Netherlands bonds and equities are taxed very high (2%). With taxes that high, bonds are just not an option IMO. You are basically guaranteed to lose against inflation.
My fail safe is my pension that I can start early if I want. In a market crash I start my pension early and that will cover more than my current expenses without the need to sell stocks.
My take away is that JEPI/JGPI might be okay(ish) for a retiree with a diversified PF that has a guaranteed income stream when the SHTF :)
Yeah totally. It's not your whole portfolio and it sounds like you're going to reinvest some of the dividends (even if reinvesting in a different strategy it still counts in my book).
I'm not sure how that 2% tax works exactly but with rates where they are it's probably not that different in the US. For taxable bonds we pay whatever our max tax bracket rate is on the income, which includes state and federal tax. For me that's nearly 50%. So, on a short-term bond paying ~4.5% I'll be paying a little over 2% in taxes.
@@FundamentalsofFinance For taxes on wealth there is no progressive tax system or difference in how short or long bonds/equities are taxed.
System in the Netherlands is paying 36% tax on an expected yield of 6% on your wealth (a bit more than 2%). So unrealized gains. You could even lose wealth in a year and be taxed as if you have made 6%.
This has now been overruled by a court so you can protest and go the realized gains route. For real estate (that I own as well) they still follow the unrealized gains method.
We are paying more taxes on wealth than the very left wing French economist Piketty suggests. 🤷♂
Kindly go into more details about the average 2% monthly upside. Another TH-camr kept showing a chart that JEPI uses 30 days 5 to 10% Out-of-the-Money Covered Calls.
No problem. With respect, that TH-cam has no idea what he or she is talking about because JEPI doesn't write covered calls at all. If you go to its web page and download its holdings, you can see that they use equity linked notes to mimic the exposure of the call options. You can't tell what they are from looking at them, like you could with an actual option contract. They describe their process in more detail in the prospectus. My information comes from an interview that Morningstar did with the portfolio managers of JEPI. They said they target 30 delta out of the money calls, which means 30% chance of expiring in the money. Historically, that's been around 2% above the existing price since the inception of the fund. It'll be a little higher when volatility is high and a little lower when volatility is low. Looking back at the monthly return over the past 3 years, it's exceeded 5% only 3 times out of 36. That includes the income. It doesn't own the same portfolio as the S&P so it can do better or worse than the S&P in any given month, but if the calls were 5-10% out of the money it would have likely had a lot more big up months than that. SPY has exceeded 5% in 9 of those 36 months.
Great video thank you
Thank you!
Unfortunately, you seem very negative about covered call ETFs. If you compare bond income over the last 5 years with JEPI, you might gain a different perspective. It seems you compare it to the S&P 500 and refer to bonds when it suits you. That's not very consistent.
The last 5 years is not predictive of the next 5 years. You're capturing an unusually great stock market and the worst bond market in history. My point was that jepi is NOT an alternative to bonds. I'm trying to explain how it'll likely to work in different market environments over time since most investors just see the last few years and assume that's what they'll always get. Unfortunately that's not realistic.
would this work in retirement- 2 million each in JEPI/JEPQ/SCHD and 4 million in BND or Sgov thanks
Yes, while I can't say whether or not it's perfect for your specific situation, it seems like a generally reasonable portfolio for someone in retirement.
Dude if you've 10m to invest there's WAY better andsafer ways to make at least quadruple what Jepi could ever bring! Just saying!
@@JD-AlphaMedia thanks
The question though is:
Wouldn't it make sense in Retirement to rely on a CC ETF like JEPI? Given that it returns between 7% and 12% per year in premiums?
What do I care at this point if the NAV goes down by, lets say 10-15% but only slowly rises (because of the cap)?
If you choose such ETF I assume you are not planning to sell shares?
Lets say I would (Retirment) invest in Bonds or pure Dividend ETFs: sure, Bonds give a bit more security, however for the trade-off of lower income.
If the dividend ETF (like FTSE All World High Div Yield) risis by 10% in NAV: what's my benefit of it if I dont want to sell?
It matters because the yield is a % of the NAV. So, if you have a steady 10% yield not your NAV is falling over time, you're actual income in $ will be falling over time. There are certain much worse options than JEPI out there but imo it is still not a strategy that is likely to produce a sustainable growing income stream over time, which is what you need if you want to rely on it in retirement.
JEPI and JEPQ are meant for people with low income. If you struggle with bills and have no debt this is perfect. It will allow you to build up a next egg without killing your budget. Then, when you have enough income, you can start to diversify.
Your perspective on these types of stocks is more geared for people with a large income. Pretend you only make the medium wage. Look at realistic rent in your area and see if your investment strategies will work for the average person.
These reviews apply equally to everyone as the ETF's results will be the same regardless of your income level.
I would say the people I'd most like to help are the ones with limited financial backgrounds and that isn't really impacted much by their education or income level. Investing isn't really taught anywhere. But those are the people we started the channel for and the people who are most vulnerable to falling into traps based on false promises made by other TH-camrs. Sadly, most of them don't really understand investing either.
@FundamentalsofFinance i am not a financial advisor like you are, but I do help a lot of people in real life learn how to invest.
From my experience, the traditional way you advocate is to slow for most people to get excited. I use Jepi and Jepq as a more stable way to show the power of investing.
Once they get that first dividend, they get super excited. Then, when they want to upgrade their investing skills, I point them to channels like yours.
Great info, thanks.
Cool upload. Both sides of the coin. Not just positives and fluff. Had no respect for youtube financial content creators prior to seeing this video.
Thank you!
I don't see how JEPI could make extra income over a period of say two years in a falling market if it can only take extra income from share price growth.
The income comes mostly from selling call options so it will be there no matter what the share price does but yes over time it will likely shrink. You can only sell covered call options on the assets you have in your portfolio (otherwise it's not covered). If the value of the underlying investments is going down, the income it pays out will also go down over time. And you are right, it's once there's a falling market that you'll really see that.
Bnd can't touch new ETFs like
High
Cshi
Jaaa
Think of jepi and its kind as a growth and income segment of a portfolio, not growth and not protection types.
Examples
Sector tilt: vgt smh xlk
Aggressive growth: qqqm schg
Growth: voo spmo xmmo
Growth and income: jepi schd jepq
Income: svol fepi
Protection: jaaa cshi
They state a goal beta of .65. If one does not understand that, then they should not be in this investment
Yeah I don't think many people truly understand this. That's why I made a video about it
@@FundamentalsofFinance I do think that one use case for JEPI and JEPQ funds that you did not cover which I would consider valid is the retiree. Who simply wants a monthly retirement flow of income and for the fund (over time) to beat inflation (which the .65 beta will do). I am not sure that using a growth versus growth comparison to SPY/SPX is the best comparison for all use cases. This person, of which I am one, does not functionally care about top line growth, but cares much more about getting 6-8% and growing the price enough to stay ahead of inflation. Of course, this assumes that one has a well round portfolio and this is only part of their strategy.
Just my two cents and a very nice video. I should have mentioned that on the first comment. Sorry
I cover JEPI for a retiree in this video: th-cam.com/video/I1SWSH7xXMg/w-d-xo.htmlsi=BvfqXgI4LJxofHBt
you're a great presenter but the edit cuts are horrible unfortunately.
Thanks for the feedback! I aim to remove all pauses and breaths so that I respect the viewers time. But maybe I should reconsider that
@@FundamentalsofFinance Great knowledge, script, and well put together. Just seeing your head move every 5-10 seconds is a bit distracting for me to watch all the way through.
Thank you for the feedback! Will look to improve going forward
I email the script to my email list, if you prefer reading. Check the free currency course link in the description
A loooong drawn out reading of an article from somewhere
Lol we posted the transcript to this on reddit. Maybe that's what you're thinking of? It was originally this video.
If you don't take risks, then you'll go nowhere, bonds are "elderly" type of investments, so irrelevant in this day and age.
Lol everyone has different objectives but one might say the same thing about covered calls. They cap your upside to generate income... who usually prioritizes income over long-term growth? Old people lol.
Btw I made a 100% return in just over a year in TMF from early 2019 to 2020. That's a bond ETF. So they're not all boring lol.
The important key point he makes is that you reinvest your dividends and capital gains. You do not use them for income. When you need income, you sell some of the investment itself. This is a much better approach.
Agree. Take only what you need and create your own income stream that mimics a salary, rather than being inconsistent and potentially dwindling down over time. An 8+% yield is not sustainable no matter how you decide to take it out.
jepi with dividend it agreat investment!! i own over 1000 shares with dividends it is great!! good luck i am ok with it!! it is etfs
This guy is not competent.
Based on?
That's not nice! I liked the video. 🙂