Balance income, total return and risk with JEPI

For the investors assessing their equity allocation today, consider a compelling solution that seeks consistent monthly income with lower volatility than the U.S. stock market.

Equity markets have been resilient so far in 2023, yet this rally has left investors feeling uneasy with what to do next. Many are wondering if they’ve “missed it” and, as such, are sitting in cash trying to figure out when to enter the market and if this rally is sustainable going forward. For the investors who are assessing their equity allocation today, a compelling solution is the actively managed JPMorgan Equity Premium Income ETF (JEPI), which seeks consistent monthly income and appreciation potential, with lower volatility than the U.S. stock market.

Navigating the concentrated market rally

The first half of 2023 was the second-best we’ve seen for the S&P 500 since the turn of the millennium (second to only 2019). It was also a historically narrow rally in scope, with the vast majority of returns driven by seven stocks. At this point, investors may be looking for opportunities in equities beyond just the market leaders of this year, especially given many other areas of the market still look attractive from a valuation perspective. In addition, should markets be more muted going forward, investors will continue to seek high levels of income, particularly in ways that do not mean taking on too much volatility or too little liquidity. 

As an equity options-based solution comprised of a high-quality equity portfolio and selling S&P 500 call options, JEPI provides a way for investors to meet income and total return needs without exceeding risk tolerances.

A conservative equity income strategy designed to reduce downside exposure by forgoing some upside participation.

A conservative equity ETF seeking income as the outcome, balanced with an attractive total return

JEPI is a highly liquid ETF offering daily transparency and tax efficiency at a low cost. The strategy combines equities with options to strike a balance among yield, capital growth and risk. JEPI seeks to deliver a significant portion of the returns associated with the S&P 500 Index with less volatility, in addition to monthly income.

Here’s how it works: We use fundamental bottom-up research to build a higher-quality, lower-beta portfolio of U.S. large cap equities with less volatile earnings and share prices. We then sell index options against that long-only portfolio and use the premiums to generate income. The result is a conservative equity income strategy designed to reduce downside exposure by forgoing some upside participation.

With JEPI, investors receive:

  • Fully active, broadly diversified equity portfolio: Leverages 20+ research analysts and an over 30-year proprietary process to find attractive stocks across sectors.
  • Innovative income: Avoids the duration risk of higher-yielding bonds and the quality risk of higher-yielding stocks and extended fixed income sectors.
  • Unique options strategy: Sells call options every week to adapt to changing market conditions. When volatility spikes and interest rates rise, for example, JEPI has the potential to provide higher income when investors most need the cushion against fluctuating prices.
  • 100% payouts: Distributes all monthly income from dividends and options premium, which are treated as coupons rather than gains so that capital isn’t returned to shareholders.

JPMorgan Equity Premium Income ETF at a glance

Ticker - JEPI

Expenses - 0.35%

Strategy - Combines defensive U.S. large cap equity portfolio with options overlay to pursue income and capital appreciation

Four ways to build stronger portfolios with JEPI

  1.  Add to income portfolios to pursue consistent, attractive yields regardless of what happens with interest rates or equity dividends.
  2.  Replace or complement higher-yielding bonds with a strategy offering no duration or credit risk and comparable, if not higher, income potential in exchange for more beta.
  3.  Deploy excess cash for investors looking to ease back into stocks with about one-third less volatility.
  4.  De-risk equity portfolios by locking in gains from dividend strategies and reinvesting the proceeds in a more conservative alternative.

With a record amount of cash on the sidelines and the potential for more muted equity market returns ahead, now is the time to be creative and active in your search for yield and total return. Discover how JEPI can help you solve for both market participation and income without sacrificing quality, liquidity or long-term growth potential.