JEPI High Dividend ETF: Long-Term Investment Benefits and Appeal

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This is only a record of my personal analysis and the contents may contain errors or information that differs from the actual situation. Please understand in advance when viewing this site.

Introduction.

For beginners who want to start investing in U.S. ETFs but are not sure which ones to choose.

I myself am always wondering which stocks to invest in and which ETFs to choose.

beforeVIG, an ETF with continuously increasing dividendsbut this time we will explain the high dividend ETF "JEPI" in an easy-to-understand manner, based on its features, advantages and disadvantages.

Here is the output of our in-depth research on JEPI, a high-dividend ETF that is attracting a lot of attention.

Check out this article to see if JEPI is right for your investment style.

What are the characteristics of JEPI ETFs?

• JEPI is an actively managed ETF offered by J.P. Morgan.
• Officially named JPMorgan Equity Premium Income ETF (JPMorgan U.S. Equity Premium Income ETF)
• Relatively new ETF established in May 2020
• The ETF seeks to generate income from a portfolio of large-cap U.S. stocks combined with option sales.
• The primary objective is to provide returns associated with the S&P 500 Total Return Index (S&P 500 Index), the primary benchmark, and to provide additional returns through wave reduction to reduce investor risk.

Learn more about ETFs here.

What is the U.S. Continuously Growing Dividend ETF VIG? - What is an ETF?

JEPI (JPMorgan Equity Premium Income ETF) has the following characteristics

Utilize covered call strategy

JEPI incorporates a covered call strategy,Aiming to achieve both capital gains (capital gain) and income gains (income gain)The company is in the process of developing a new business model.

Volatility reduction

This ETF aims to keep volatility low by ensuring income from option premiums,Designed to provide a constant return even when the market declinesThe company has been

Low cost

In active ETFs,JEPI has relatively low costswith a

high dividend

JEPI has a high dividend yieldIt is known to be an attractive option for investors.

What is a covered call?

Covered call is an investment strategy that combines equity investment and options trading.
Specifically, it refers to a transaction in which a third party sells the right to sell its shares to a third party for shares it already owns.

Mechanism of covered call

• Shareholdings: (%)First, the company owns shares of a certain stock.
• Selling call options:.The company sells to a third party the right to sell its shares at a specific price (strike price) for that holding. This right to sell is called a "call option.
• Premium Receipt:.By selling a call option, you receive a fee, called a "premium," from the buyer of the option.

Risks and Benefits of Covered Calls

• BenefitsYou will receive a premium on the option, which will be added as part of your earnings. This means that even if the stock price remains flat or declines slightly, you can still expect to receive a certain amount of earnings.
• Risks: The risk ofOn the other hand, if the share price rises significantly, the company must sell its shares at the exercise price and cannot benefit from the increase.

In other words, covered calls are a strategy to secure a certain level of income at the expense of a large rise in the stock price.
It is often used as a means to increase revenues during periods when markets are flat or showing slight declines.

JEPI focuses on income gains, not just price increases

The use of a covered call strategy means that the ETF is aiming for stable income rather than pursuing large price increases.

However, this does not mean "no price increase is expected at all"; price increases are quite possible depending on market conditions, JEPI's investment policy, and other factors.

In short, JEPI is an ETF that aims for high dividend yield and stable income, and is suitable for investors who value income gain (income gain) more than pursuing large capital gain (capital gain).

What is the purpose of keeping volatility low?

Volatility is an indicator of the intensity and instability of price fluctuations of financial instruments.
Specifically, it is used as an indicator of how large a rise or fall a stock price, exchange rate, etc. may have.

High volatility means that prices are highly volatile, while low volatility indicates that prices are relatively stable.

What does it mean to keep volatility low?

Reducing volatility means aiming to reduce large ups and downs in the price of investment instruments and to have a more stable price trend.

This allows investors to avoid large unexpected losses and to expect stable returns.

Why is it important to keep volatility low?

• Risk reductionLarge price fluctuations pose a risk to investors. By keeping volatility low, this risk can be reduced.
• Stable returns:.Investment instruments with less price volatility are more likely to provide stable returns.
• Long-term investments:.Low volatility makes it suitable for long-term investments because it is less susceptible to short-term market fluctuations.

In other words, keeping volatility low is an important factor in keeping investors at ease.
Avoid the risks associated with large price fluctuations and pursue stable income.

What is an active ETF?

An Exchange Traded Fund (ETF) is a type of mutual fund that holds a collection of stocks, bonds, and other financial instruments with the characteristics of being traded on a stock exchange.

ETFs can be divided into two main categories: passive ETFs and active ETFs.

Active ETFs are fund managers actively selecting and trading assets to achieve returns that exceed a specific index (benchmark)Refers to ETFs.

Active ETF Features

• Based on the fund manager's analysis of market trends and each stock,Active asset selection and tradingThe following is a list of the most common types of products that can be used.
• The purpose of active ETFs is,Outperforms the return of the referenced index or benchmarkThings to do.
• Because of active management, management fees and commissions are often higher than for passive ETFs.

Differences between active and passive ETFs

• Passive ETFs:.It aims to track a specific index or benchmark as accurately as possible. For example, an ETF that tracks the Nikkei Stock Average aims to achieve a return as close as possible to the movement of the Nikkei Average.
• Active ETFs:.The fund manager makes active investment decisions with the aim of achieving returns above the benchmark.

To summarize in plain English.

Active ETFs are investment products that aim to achieve above-market average returns by leveraging the knowledge and experience of experts.

Therefore, while return expectations are high, risks and management costs may also be high.

What is JEPI's expense ratio?

JEPI Net Expense Ratio: 0.35%

This expense ratio represents the costs associated with managing the ETF, expressed as a percentage of the annual assets under management.
Specifically, investors holding JEPI will pay an annual expense of 0.351 TP3T of the amount of assets under management.

This expense ratio is relatively low for an actively managed ETF.
However, when considering an investment, one should be very careful because there are many other costs that may be incurred, such as transaction fees and taxes.

The previously mentioned "VIGThe expense ratio for passively managed ETFs, such as the ETFs of the Passive ETFs, is 0.06%, so the cost is larger than that of passive ETFs.

However, the expense ratio for a typical actively managed ETF: 0.50% - 1.50%,JEPI is one of the least expensive and most attractiveIt can be said.

What do you mean by "high payout?"

The term "high dividend" refers to a financial instrument, such as a stock or mutual fund, having a higher dividend yield than the average or other instruments in the same category.

The dividend yield is the dividend per share divided by the price of that share, and is a measure of the percentage of income an investor can earn by holding that stock.

To summarize the attractions and caveats of high payouts,

• High-dividend stocks and mutual funds are able to receive dividends on a regular basis, regardless of whether the stock price rises or falls,Earnings stability expectedThe following is a summary of the results of the project.
• Dividends received.Reap the benefits of compound interest by reinvesting(2) The company may
• On the other hand, there is no guarantee that high dividends will be paid continuously, and if a company that pays high dividends returns its profits to shareholders without reinvesting them, the company's growth potential may be in question.

In other words, "high dividend" means that a high percentage of the investor's income is derived from holding the financial instrument.

High-dividend investment products are often attractive options for investors seeking stable income.

What is JEPI's dividend yield?

JEPI has a dividend yield of about 8-101 TP3T, which is very attractive.

How can JEPI yield so much?

As for why JEPI (JPMorgan Equity Premium Income ETF) can produce high yields, see below.

Utilization of call option transactions

JEPI utilizes equity-linked notes (ELNs) based on call option transactions. This allows the bonds to be redeemed at maturity while earning a high coupon yield.

Combination of U.S. large-cap stocks

JEPI's portfolio is built around large-cap U.S. stocks such as Microsoft. Dividends from these large-cap stocks, combined with premiums from the call option transactions mentioned above, have enabled JEPI to achieve high monthly distributions.

Balanced portfolio 

While JEPI pursues high dividend yields, it is also considered easy to target capital gains (share price appreciation). This allows investors to expect stable returns.

JEPI achieves high yields by utilizing a combination of call option trading and U.S. large-cap stocks.
This structure sets JEPI apart from many other ETFs and allows it to offer a high dividend yield.

When are JEPI's distributions (dividends) paid?

JEPI is,The fund aims to make monthly distributions with income (stock dividends and option premiums) as the source of funds.

However, distributions are not necessarily made monthly, and the existence and amount of distributions may vary.

JEPI's current share price and long-term chart

As this is a new ETF that has been in operation since May 2020, it has a short investment period.

The graph shows that, indeed, volatility has been low

What are the advantages of investing in JEPI?

• JEPI employs a "covered call strategy" of selling call options, which allows it to add to its income earnings. This allows it to follow the rise in stock prices to a certain degree,High income gainsThe characteristics of this product are as follows.
• JEPI isPortfolio focused on defensive stocksThe fund is constructed with the following structure and aims to be relatively stable in the face of market fluctuations.
• JEPI isAim to make monthly distributions and get regular cash flowThis is an advantage in constructing an investment strategy because it allows
• While JEPI pursues high dividend yields, it is also considered easy to target capital gains (share price appreciation). This allows investors toExpect stable earningsYou can do this.

JEPI's strategy of aiming for high income gains combined with a portfolio of mainly defensive stocks offers attractive advantages to investors.

What are the possible disadvantages of investing in JEPI?

• JEPI employs a covered call strategy, but this strategy also comes with limitations. For example, if the stock price rises significantly, JEPI will not be able to enjoy any gains beyond the sale price (strike price) of the covered call.
• JEPI has a portfolio of large-cap U.S. stocks, but they may have a tendency to fall steadily in times of market turbulence.

In other words, while JEPI has the advantage of aiming for high income gains, there are also disadvantages that investors should consider, such as the limitations of covered call strategies and their impact on market volatility.
It is important to understand these disadvantages and consider investing in JEPI in light of your own investment strategy and risk tolerance.

What are the components of JEPI?

The number of JEPI constituents is 136.
Diversification into a very large number of stocks, especially the S&P 500.

JEPI's main constituents (top 20 stocks) are as follows
The top 20 stocks have a weighting of about 191 TP3T.

It includes many well-known and blue-chip companies that everyone knows.

See also:JPMorgan Equity Premium Income ETF

Other instruments include Equity Linked Notes, REITs, and MONEY MARKET.

What are Equity Linked Notes (ELNs)?

Equity Linked Notes (ELNs) are a type of investment product, a bond whose return is linked to the performance of a stock or stock index.

ELNs have a structure that combines the characteristics of fixed income instruments and stock market returns.

What is JEPI's sector ratio?

Sector ratios are balanced and well distributed,Heavily invested in the information technology, financial, and health care sectorsIt can be seen that

What are the conditions for inclusion in JEPI?

The conditions for inclusion in these ETFs are generally selected for stocks with the following characteristics

• The main market value is significant,Stable large-cap stocksInvest in
• High dividend yieldThere is a preference for stocks with
• To maximize the option premium, some degree ofStocks with volatility (price fluctuation) are selected andThe following is a list of the most common reasons why the company has been unable to achieve its goal.
• Basic financial health and growth potential,Companies with solid fundamentalswill be selected.

How important is the dividend yield when considering long-term investments?

Dividend yield is very important when considering long-term investments.

The main reasons for this are

• Dividends are part of the income earned from an investment, and in addition to capital gains from an increase in the stock price, dividends are also a return on investment.
• By reinvesting the dividends, the company can enjoy the benefits of compound interest.

What are JEPI's distribution trends?

JEPI distributions fluctuate but are around $0.35 to $0.45.

What are the factors behind the many articles and searches for "JEPI is not recommended"?

Possible reasons for the high number of articles and search needs for "do not recommend JEPI" include

• Some investors may feel that JEPI underperforms compared to market averages and other ETFs. High volatility ETFs may provide higher returns, especially when the market is bullish.
• JEPI incorporates a covered call strategy, and some investors may be skeptical of this approach. because this strategy may limit potential gains when the market is rising.
• If you feel that JEPI's management costs are too high for an actively managed ETF, that may be a reason not to recommend it.
• If JEPI's investment strategy and risk profile do not match the risk tolerance or investment objectives of some investors, it could be argued that JEPI is not recommended.
• At certain times of the year, when market volatility increases, covered call strategies may not produce the expected results. This can lead to a negative view of JEPI.

Because of these factors, JEPI should be selected according to specific investment objectives and management style, and is not generally recommended for all investors.

Can JEPI be selected as a Nisa target?

• Although it is possible to trade within the general NISA framework, it is not possible to invest in JEPI using the "Tsumitate NISA (savings NISA)" and thus cannot enjoy the benefits of the "Tatemono NISA" (savings NISA).
• Only domestic investment trusts (and some domestic ETFs) that meet certain requirements can be invested in the Tatemono NISA, and VIG, an overseas ETF, cannot be invested in the Tatemono NISA.

To summarize the features of JEPI

• JEPI aims to offer a high dividend yield, especiallySuitable for income-oriented investors.
• We employ a covered call strategy, whereby we sell call options on the shares we own.Option premiums are earned as income.
• JEPI isAiming for monthly distributions, providing investors with regular cash flowDo.
• The objective is to keep market volatility low,Relatively stable operation against market turbulenceThe company aims to
• JEPI is actively managed, with the management team making investment decisions based on market conditions.
• Composed primarily of large-cap U.S. stocks, the fund pays distributions based on dividends from these companies and income from options trading.
• The company also focuses on risk management, controlling risk through portfolio rebalancing and sector diversification.
• The expense ratio is 0.351 TP3T, but lower than other actively managed ETFs.

These characteristics make JEPI an attractive option for investors, especially those who value dividend income and seek a portfolio that is resilient to market fluctuations.

Understanding Distribution Reinvestment Strategies and Volatility in JEPI Investments

How do I purchase one share with a monthly distribution?

To purchase one share per month using JEPI's distributions, one must consider JEPI's stock price and the amount of the distribution.
For example, assuming JEPI's stock price averages between $50 and $55, if the monthly distribution is $55 or more, you can reinvest the distribution to purchase one share.
However, the actual amount of the distribution depends on market conditions and the performance of the ETF, so it is not always possible to purchase one share every month.

Advantages and disadvantages of low volatility

The characteristic of low volatility means that market price fluctuations are relatively small, which is an advantage for investors who prefer a stable investment environment.
On the other hand, low price volatility is not suitable for investment strategies that aim for large profits in a short period of time, which may be a disadvantage.
Others believe that low volatility means less concern about the timing of purchases, but this depends on the investor's strategy and objectives.

Possibility of increasing the number of shares in the distribution

If your JEPI assets are $6,700 and the annual yield is 101 TP3T, you can expect to earn $670 per year.
Simply dividing this by 12 months yields a monthly distribution of approximately $55.83.
If JEPI's stock price is stable at $55, one could theoretically purchase a share of JEPI for a monthly distribution.
However, the actual amount of distributions and the share price fluctuate, so the number of shares may not necessarily increase each month.

The Benefits of Compound Interest

Calculating $6,700 at 150 yen to the dollar, that would be one million five hundred thousand yen.
In other words, building JEPI assets of about 1 million yen could make it easier to enjoy the compounding effect of reinvesting distributions.
However, in order to take full advantage of the compounding effect, distributions must be continuously reinvested and the performance of the investment must be stable.

For foreign exchange considerations, dividends are paid in U.S. dollars.
Therefore, reinvesting in dollars reduces the risk from currency fluctuations.

With the yen currently weakening, purchasing foreign stocks in yen makes you more vulnerable to the effects of currency fluctuations. Therefore, currency risk should be treated as an important consideration when considering U.S. investments.

Which brokerage firms can I buy shares of JEPI?

I have listed the major brokerage firms that handle JEPI stock. I personally make my purchases through SBI Securities, but they are available through many brokerage firms.

Please consider ETFs based on your own judgment after properly understanding how they work and the risks involved.

summary

The features of the U.S. ETF "JEPI" and the advantages and disadvantages of investing in it were explained in detail.

This ETF is a particularly attractive option for income-oriented investors seeking stable dividend income.
The characteristic of low volatility provides a degree of comfort in the face of market uncertainty, and monthly distributions can be a stable source of cash flow for investors.

I myself have purchased JEPI and although I have not yet received many distributions, I find the monthly income income very attractive.

With time as an ally in long-term investment, ETFs can be said to lead to steady asset building by steadily increasing the number of shares each month.

Although not presented here, it has the same structure and focuses on the constituent stocks of the NASDAQ 100.JEPQThe "JPMorgan Nasdaq Equity Premium Income ETF" (JPMorgan Nasdaq Equity Premium Income ETF) is also attractive.

Since there are more NASDAQ stocks here, it may be easier to obtain performance from price increases compared to JEPI.

JEPQ: High-Yield Tech Investment and Nasdaq 100 Strategy

The features and investment advantages and disadvantages of JEPQ, an ETF that focuses on high-dividend, high-tech stocks, are explained. Find out in this article if JEPQ is the right investment style for you, the best choice for those seeking investment in NASDAQ and stable cash flow.

mifsee.com

JEPI and JEPQ can be attractive investment options for income-earning purposes.

With the exception of those who adopt extreme strategies such as aiming for a FIRE (Financial Independence, Retire Early) lifestyle, using JEPI as part of asset building can be a beneficial choice.