I use JEPI to accumulate income to invest in long term fund while we are in the late stage of the business cycle. It pays a monthly dividend which makes the process faster in the event that I hit my stop loss. It also has shown to hedge against drawdowns. I use this in tax deferred account with JEPQ. The costs are higher but I prefer managed active funds. I wish there was a way to set a expense rate with a provider for having multiple funds like some of the mutual funds that have million dollar buy minimums and hold many funds in them but for a lower expense.
Larry Swedroe, in his book "The only guide to alternative investments you'll ever need", provide an excellent description of the "flawed" of a covered calls strategy. ..It[Covered calls] eliminates the potential for the good fat tail (the highly positive return), while having no impact on the risk of the bad fat tail (the extremely negatives return).
I’ve watched a few similar videos of late and have completely changed my perspective on the CC ETFs. I’ll never be too lazy in retirement to choose an inferior way to invest my money. The math is clear. Buy the index and sell some for the income. Thanks for the video.
Thank you Rob for sharing your insights on covered calls ETFs and JEPI . For short term ( Bear market ) would it not be wise to hold some money there ?
I just recently discovered your channel. This was a great video and you convinced me to not invest in these products. I did a little covered call writing on individual stocks but found it's better to just buy quality companies at fair prices and let them run.
Unless you're retired and have sufficient funds for your expected lifespan and no heirs to consider then income can be a less stressful way to go. Depends on each individuals needs/wants as Rob points out. If I was investing for a longer term and not retired then total return helps to reach the target savings amount faster (in theory).
Thanks Rob, this video helps a lot, I have only heard from the perspective of what the fund holds and call options to account for the high yield. And not comparing an apples to apples of the fund, all options itself relative to it's purpose, trade fees, taxes, and expenses in the long run.
Thanks Robb for confirming the conclusion I came to, reluctantly, wrt covered-call etfs. I do on occasion write covered-calls but only when I want someone to pay me to liquidate shares OR if I feel a particular equity position I own is both profitable and overbought. This squeezes a little extra juice from the market but I can't say that it's made me wealthy.
Excellent presentation A simple illustration is something that Rob said on a different video a while back when it comes to dividends When a dividend is paid less a 10% but then the share price goes down by the same amount so all it really was was a wash It might have made you feel good but it really was a wash So it is really just all the way you look at it
There are growth funds out there down 30% This year. I will gladly take a wash with jepi and dollar cost average the dividends back into jepi and schd. I'm up this year with this strategy. I love jepi!
Can you make a video on how to select etfs for your portfolio and what to look at, beyond the expense ratio, to weed out etfs. For example I am looking at etfs to tilt the large cap part of my portfolio towards value and I see recommendations from investors like Paul Merriman to select between RPV, VONV, SPYV etc but there are other popular large cap value etfs like SCHD or VTV.. How do you select one ETF to fill that spot in a portfolio? I understand that different etfs track different indexes like the S&P 500, Russell 1000, etc does that make a difference in how you select an etf? Thanks! Love the channel!
CC ETFs only make sense as a temporary tactical solution: if you see that the market is going downhill and you need some income short term. It only works over a 1 to 3 year horizon.
Rob, keep doing the good work educating on the irrelevance of dividends and yield when it comes to total returns on equity. You will continue to get hate mail (dividend investors are VERY passionate and dogmatic to a fault) but the truth doesn't need sympathy to be accurate.
Always a great analysis, Rob. One scenario you may consider a covered call fund for is a sideways market. However, because of the forced 401/403/etc. investments a sideways market is a rare outcome.
I think you should consider- Jepi is a conservative fund and is not comparable to Voo. It will do the better when the market is range bound… It is in my income portfolio along with bonds…I am using it to boost my income returns. I have growth stocks in another account. 😊
Rob, what about investing in a high dividend ETF within a corp brokerage that gets dividends taxed at 10.5%? The focus is not on growth, but the tax efficiency of dividends vs short/long term cap gains?
What would you do if you had a small amount invested in a covered call ETF in a taxable account? Sell it now and use the opportunity as a learning experience or just let it sit there?
If you were to add 300k$ it'd give you an ~annual 10-14% dividend, which means at around 100-140k annually (assuming of course they dont cut their divs, which is always a possibility). Most if not all single stocks, even the best ones out there give no more than 4% and some BDC's/REITs can at best go up to 8%, sure you can get some price appreciation with those, but none the less, I think that's the allure with these ETFs like with JEPI etc. you can get a shitload of $ monthly divs with minimal risk. Even if say one of the stocks in the ETF does horribly the others will do ok so you dont lose all your money like with if you had your money in that 1 that tanked.
For income driven, covered call ETFs are MUCH MUCH better to hold bonds. If looking income from equites, many peoples are often picked up wrong time to sell. By the way, during bear market, these covered call EFTs will consider your "Dry Powder", plus earn 10%+ yield (xyld, for example, was only slight loss during last year's bear market).
Hi Rob, I have watched many videos on covered call ETF’s and I don’t feel that you covered the different phases an investor has through out their life time and their needs. Yes if you are 20-30yrs a covered call ETF would not be for them because they don’t need income they should be looking for growth, time is on a 20-30yr side. But if you are currently retired and you watch bonds and equities loose 20% in 2022 and then see inflation erode your buying power. You would ever recover because you are withdrawing 4-5% and in some cases more than 5% of your portfolio. Income is the foremost priority for the sixty something crowd. Not only would a retiree’s wealth not recover but they would pay an advisor such as you a percentage for giving loosing advice. I am retired and JEPI is working well for my needs.
I agree, bond funds/etfs are a terrible investment, I have not done anything but loose money in them ! It boggles my mind why they are offered and recommended. Buy bonds and hold to maturity and you get the interest as well as full value back at maturity. Right now I am buying T Bills and CDs instead of bonds , both paying over 5% . I hate bonds funds, the only make the fund manager money !!!
Thank you Rob! I am finally getting the idea of total returns vs yields! This is very helpful!! I now need to go back to figuring out how to do bucket #2 because I was thinking of jepi as a potential bucket 2 strategy.
The reason I like JEPI especially for my wife’s retirement portfolio is because she has a heart attack and gives me a hard time any time her account goes down significantly. as you can see VOO went down 13% in its worst year and JEPI went down less than 2%. JEPI still has good upside and limited downside so it helps us both sleep better at night
If one is to use the 3 bucket system these high yield low growth stocks like XYLD are in bucket #2 providing $$ for bucket #1 when the market is down and you don’t want to touch bucket #3. This is just another way to look at them, jm$0.02
Thanks, Rob. I was looking at JEPI recently and was concern as I would need to pay 30% WHT on dividend as an NRA even though the projected yield was high. I am considering VUAA as an alternative to VOO due to the reduced 15% WHT on dividend.
From Yahoo finance: Ytd total return VOO -14.85 JEPI -2.07 XYLD -11.21 So JEPI is this years clear winner. I like that you never ever have to sell and thus avoid market timing. I own all three btw.
Yup. JEPI is fantastic & great management of the ETF from JP Morgan. when I retire in 5 years I will live off the dividends alone & not touch the principal by selling shares. I pair JEPI with DIVO & $O Realty Income
It is not an extreme statement to say these kind of products are fairly useless given other available alternatives and their tendency to decay over time. We are on version 3.0 of these things, with the 1.0 arriving in the 1980s and 2.0 in the early 2000s. First they decay. Then they go away. I would not expect this time to be different. Like many annuity and structured products, these products were created to be sold, not bought. That is why they are heavily marketed. Some combination of the underlying and a short-term bond fund will invariably outperform the covered call fund.
Yup. I don't disagree. If I ever get an annuity, which I am considering for when I retire (depending on portfolio size at the time) it would be a simple SPIA and only so that I can keep the rest of my portfolio aggressive at around 80/20 if not 90/10.
Totally miss the value of this in a Roth IRA for someone young who also has a company matched 401k. Creating tax free high income in the Roth and capital appreciation in the 401k
Dividends are a wash after it's repriced ex-dividend so it's pointless to buy and immediately collect. The optimal scenario is buy shares now, let them reinvest and collect the dividends years down the road. 100 shares now could turn into 200-220 shares in ten years. Then collect the dividend which will yield about 20% annually on the initial investment. It will quickly pay for itself at that point. The other scenario is if you think the market is overbought or going to sideways or down but you're not sure and you don't want to fully pull out of the market. This hedges some of that market risk.
Depends if your retired or not. I use these funds to pay for my expenses in retirement, I dont care about capitol appreciation. Your kind of missing the point, if you get a fund that appreciates and the only way you can generate income is to actually sell the stock. That means after a few decades you will have zero stock. With a good div ETF it wont get much capitol appreciation, but over the years you wont sell any shares, so in 20 years you will have the same amount of stock and you paid your expenses. You also must feed the pig, in other words i take 90 percent and add 10 percent drip, that also makes the fund growth. In one of my funds, TSLY i make .80 return with a 5600 div this month and I even got 9000 capitol appreciation this month. Like I said it depends where you are in life!
I agree. Selling involves massive amounts of market timing. The alternative is doing buckets to avoid selling in a down market. Doing this lowers returns as you have funds in cash or bonds that drop your total return. I’m loving JEPI and JEPQ. Haven’t sold a thing since retiring 4/22. I’m adding shares actually.
@@unorthodocs1 I did sell JEPI for TSLY which was a good move, but probably going to add it back as the more conservative part of the div machine. I have JEPQ and boy its even giving me like 20,000 in capitol appreciation too. I never knew what a div was a year ago and now I am living off divs, I just love them. Look at TSLY, APLY, AMZY, NVDA and OARK. You could just put a small amount like 40,000 and retire just off these Yieldmax funds!
You are so right! I should have bought NVDA at 300, MMM at 201 or DIS at 191. Maybe 20 yr bonds yielding 2 1/2%. Even if I lost thousands when they crashed, all I needed is a 300% gain to break even. Perhaps you could provide winners that won't go down?
Good video. The four most dangerous words in investing are; it's different this time; Sir John Templeton. Economies are cylical, and the markets have shown that they'll recover. Make sure you're part of those recoveries.
Thanks for explaining those. I've been looking at both of them with uncertainty. Great channel Rob!!
Thank you Rob, a thorough analysis of the total picture which is all that counts in the end.
I use JEPI to accumulate income to invest in long term fund while we are in the late stage of the business cycle. It pays a monthly dividend which makes the process faster in the event that I hit my stop loss. It also has shown to hedge against drawdowns. I use this in tax deferred account with JEPQ. The costs are higher but I prefer managed active funds. I wish there was a way to set a expense rate with a provider for having multiple funds like some of the mutual funds that have million dollar buy minimums and hold many funds in them but for a lower expense.
Larry Swedroe, in his book "The only guide to alternative investments you'll ever need", provide an excellent description of the "flawed" of a covered calls strategy.
..It[Covered calls] eliminates the potential for the good fat tail (the highly positive return), while having no impact on the risk of the bad fat tail (the extremely negatives return).
You missed a key point about JEPI. It is not using covered calls which put their shares at risk for the upside.
I’ve watched a few similar videos of late and have completely changed my perspective on the CC ETFs. I’ll never be too lazy in retirement to choose an inferior way to invest my money. The math is clear. Buy the index and sell some for the income. Thanks for the video.
Fantastic work Rob. Best video i've seen on the subject.
Thank you for a fantastic video and clarifying the points around these ETF's. Helped me decide what to do and not to do
Appreciate your detailed analysis Rob. I was very tempted to invest in JEPI
Thank you Rob for sharing your insights on covered calls ETFs and JEPI . For short term ( Bear market ) would it not be wise to hold some money there ?
Well done. Thank you for the clear analysis!
I just recently discovered your channel. This was a great video and you convinced me to not invest in these products. I did a little covered call writing on individual stocks but found it's better to just buy quality companies at fair prices and let them run.
I love the focus in Total Return vs. just dividends.
Unless you're retired and have sufficient funds for your expected lifespan and no heirs to consider then income can be a less stressful way to go. Depends on each individuals needs/wants as Rob points out. If I was investing for a longer term and not retired then total return helps to reach the target savings amount faster (in theory).
Great presentation. Clear understandable information. You’re a breath of fresh air and a wealth of knowledge. I’m a fan..
Thanks Rob, this video helps a lot, I have only heard from the perspective of what the fund holds and call options to account for the high yield. And not comparing an apples to apples of the fund, all options itself relative to it's purpose, trade fees, taxes, and expenses in the long run.
Thanks Robb for confirming the conclusion I came to, reluctantly, wrt covered-call etfs. I do on occasion write covered-calls but only when I want someone to pay me to liquidate shares OR if I feel a particular equity position I own is both profitable and overbought. This squeezes a little extra juice from the market but I can't say that it's made me wealthy.
Excellent presentation
A simple illustration is something that Rob said on a different video a while back when it comes to dividends
When a dividend is paid less a 10% but then the share price goes down by the same amount so all it really was was a wash
It might have made you feel good but it really was a wash
So it is really just all the way you look at it
There are growth funds out there down 30% This year. I will gladly take a wash with jepi and dollar cost average the dividends back into jepi and schd. I'm up this year with this strategy. I love jepi!
Can you make a video on how to select etfs for your portfolio and what to look at, beyond the expense ratio, to weed out etfs. For example I am looking at etfs to tilt the large cap part of my portfolio towards value and I see recommendations from investors like Paul Merriman to select between RPV, VONV, SPYV etc but there are other popular large cap value etfs like SCHD or VTV.. How do you select one ETF to fill that spot in a portfolio? I understand that different etfs track different indexes like the S&P 500, Russell 1000, etc does that make a difference in how you select an etf?
Thanks! Love the channel!
CC ETFs only make sense as a temporary tactical solution: if you see that the market is going downhill and you need some income short term. It only works over a 1 to 3 year horizon.
Thank you Rob. Very helpful explaination.
Rob, keep doing the good work educating on the irrelevance of dividends and yield when it comes to total returns on equity. You will continue to get hate mail (dividend investors are VERY passionate and dogmatic to a fault) but the truth doesn't need sympathy to be accurate.
Always a great analysis, Rob. One scenario you may consider a covered call fund for is a sideways market. However, because of the forced 401/403/etc. investments a sideways market is a rare outcome.
Well, with the dividends reinvested wouldn’t you be able to buy more shares, versus just letting the price go up and down?
I think you should consider- Jepi is a conservative fund and is not comparable to Voo. It will do the better when the market is range bound… It is in my income portfolio along with bonds…I am using it to boost my income returns. I have growth stocks in another account. 😊
Rob in a market bottom situation let’s say market is down 20% is this a good buy? What about market is going sideways for several years?
Thanks for the video Rob, very well explained and easy to understand 😊
Have you looked at the scenario reinvesting the yield in covered called etf.
That is exactly one of the first couple of scenarios in this video! VOO kicks XYLD’s butt even when distributions are reinvested.
Interesting ETF. Does JPM sell covered calls on the ETF or the underlying funds that the ETF owns?
In a Bull market JEPI would be a choice to no long term income. In a bear market XYLD. No long term both. Very good vídeo. Congrats
Rob, what about investing in a high dividend ETF within a corp brokerage that gets dividends taxed at 10.5%? The focus is not on growth, but the tax efficiency of dividends vs short/long term cap gains?
Thanks for this Rob!
Hi Rob, Would you recommend to buy JEPI into Roth IRA or traditional IRA? Thanks in advance.
What would you do if you had a small amount invested in a covered call ETF in a taxable account? Sell it now and use the opportunity as a learning experience or just let it sit there?
If you were to add 300k$ it'd give you an ~annual 10-14% dividend, which means at around 100-140k annually (assuming of course they dont cut their divs, which is always a possibility). Most if not all single stocks, even the best ones out there give no more than 4% and some BDC's/REITs can at best go up to 8%, sure you can get some price appreciation with those, but none the less, I think that's the allure with these ETFs like with JEPI etc. you can get a shitload of $ monthly divs with minimal risk. Even if say one of the stocks in the ETF does horribly the others will do ok so you dont lose all your money like with if you had your money in that 1 that tanked.
For income driven, covered call ETFs are MUCH MUCH better to hold bonds. If looking income from equites, many peoples are often picked up wrong time to sell. By the way, during bear market, these covered call EFTs will consider your "Dry Powder", plus earn 10%+ yield (xyld, for example, was only slight loss during last year's bear market).
Hi Rob, I have watched many videos on covered call ETF’s and I don’t feel that you covered the different phases an investor has through out their life time and their needs. Yes if you are 20-30yrs a covered call ETF would not be for them because they don’t need income they should be looking for growth, time is on a 20-30yr side. But if you are currently retired and you watch bonds and equities loose 20% in 2022 and then see inflation erode your buying power. You would ever recover because you are withdrawing 4-5% and in some cases more than 5% of your portfolio. Income is the foremost priority for the sixty something crowd. Not only would a retiree’s wealth not recover but they would pay an advisor such as you a percentage for giving loosing advice. I am retired and JEPI is working well for my needs.
I agree, bond funds/etfs are a terrible investment, I have not done anything but loose money in them ! It boggles my mind why they are offered and recommended. Buy bonds and hold to maturity and you get the interest as well as full value back at maturity. Right now I am buying T Bills and CDs instead of bonds , both paying over 5% . I hate bonds funds, the only make the fund manager money !!!
You can use the JP Morgan equivalent mutual fund to JEPI for a further lookback.
Isn’t JEPI a good protection ETF given that the total return was higher than the “regular” stock funds in a bear market?
Good one Rob!
Thank you Rob! I am finally getting the idea of total returns vs yields! This is very helpful!!
I now need to go back to figuring out how to do bucket #2 because I was thinking of jepi as a potential bucket 2 strategy.
Tkx so much for your valuable advice 😊
Rob: Spot on!!
The reason I like JEPI especially for my wife’s retirement portfolio is because she has a heart attack and gives me a hard time any time her account goes down significantly. as you can see VOO went down 13% in its worst year and JEPI went down less than 2%. JEPI still has good upside and limited downside so it helps us both sleep better at night
When you are talking about an 80/20 stock/bond portfolio, are the bonds you are talking about like treasuries?
Very informative. Thanks for your time
How much % of the portfolio and they writing calls of? If JEPI is out of the money, I think it’s not a bad deal? Bull market won’t impact much?
Plz consider putting out a short one on hedging VOO with lifestyle choices. I had never thought of that but i suppose that is what i do!
If one is to use the 3 bucket system these high yield low growth stocks like XYLD are in bucket #2 providing $$ for bucket #1 when the market is down and you don’t want to touch bucket #3. This is just another way to look at them, jm$0.02
Thanks, Rob. I was looking at JEPI recently and was concern as I would need to pay 30% WHT on dividend as an NRA even though the projected yield was high. I am considering VUAA as an alternative to VOO due to the reduced 15% WHT on dividend.
Why bund when high interest saving provides 4+%?
Great information!
Can you also talk about mortgage REITS? How risky is that compared to other assets?
Yes those are being advertised heavily in the sound so good so I look forward to Rob’s presentation on that subject in a future video
This is a great video.
From Yahoo finance:
Ytd total return
VOO -14.85
JEPI -2.07
XYLD -11.21
So JEPI is this years clear winner. I like that you never ever have to sell and thus avoid market timing. I own all three btw.
Yup. JEPI is fantastic & great management of the ETF from JP Morgan. when I retire in 5 years I will live off the dividends alone & not touch the principal by selling shares. I pair JEPI with DIVO & $O Realty Income
It is not an extreme statement to say these kind of products are fairly useless given other available alternatives and their tendency to decay over time. We are on version 3.0 of these things, with the 1.0 arriving in the 1980s and 2.0 in the early 2000s. First they decay. Then they go away. I would not expect this time to be different.
Like many annuity and structured products, these products were created to be sold, not bought. That is why they are heavily marketed. Some combination of the underlying and a short-term bond fund will invariably outperform the covered call fund.
Yup. I don't disagree. If I ever get an annuity, which I am considering for when I retire (depending on portfolio size at the time) it would be a simple SPIA and only so that I can keep the rest of my portfolio aggressive at around 80/20 if not 90/10.
Jpm bond etfs can compliment the stock ones
Totally miss the value of this in a Roth IRA for someone young who also has a company matched 401k. Creating tax free high income in the Roth and capital appreciation in the 401k
you could have used JEPIX for a longer tenure while comparing to get two more years of data to look at. A significantly different picture!
Dividends are a wash after it's repriced ex-dividend so it's pointless to buy and immediately collect. The optimal scenario is buy shares now, let them reinvest and collect the dividends years down the road. 100 shares now could turn into 200-220 shares in ten years. Then collect the dividend which will yield about 20% annually on the initial investment. It will quickly pay for itself at that point. The other scenario is if you think the market is overbought or going to sideways or down but you're not sure and you don't want to fully pull out of the market. This hedges some of that market risk.
Thanks. Very informative. I'll stay away from these types of funds
Depends if your retired or not. I use these funds to pay for my expenses in retirement, I dont care about capitol appreciation. Your kind of missing the point, if you get a fund that appreciates and the only way you can generate income is to actually sell the stock. That means after a few decades you will have zero stock. With a good div ETF it wont get much capitol appreciation, but over the years you wont sell any shares, so in 20 years you will have the same amount of stock and you paid your expenses. You also must feed the pig, in other words i take 90 percent and add 10 percent drip, that also makes the fund growth. In one of my funds, TSLY i make .80 return with a 5600 div this month and I even got 9000 capitol appreciation this month. Like I said it depends where you are in life!
I agree. Selling involves massive amounts of market timing. The alternative is doing buckets to avoid selling in a down market. Doing this lowers returns as you have funds in cash or bonds that drop your total return. I’m loving JEPI and JEPQ. Haven’t sold a thing since retiring 4/22. I’m adding shares actually.
@@unorthodocs1 I did sell JEPI for TSLY which was a good move, but probably going to add it back as the more conservative part of the div machine. I have JEPQ and boy its even giving me like 20,000 in capitol appreciation too. I never knew what a div was a year ago and now I am living off divs, I just love them. Look at TSLY, APLY, AMZY, NVDA and OARK. You could just put a small amount like 40,000 and retire just off these Yieldmax funds!
You are so right! I should have bought NVDA at 300, MMM at 201 or DIS at 191. Maybe 20 yr bonds yielding 2 1/2%. Even if I lost thousands when they crashed, all I needed is a 300% gain to break even. Perhaps you could provide winners that won't go down?
thanks
Beautiful..
ty
Good video. The four most dangerous words in investing are; it's different this time; Sir John Templeton. Economies are cylical, and the markets have shown that they'll recover. Make sure you're part of those recoveries.
NICE