JEPI vs. VOO: A Comprehensive Comparison
JEPI and VOO are popular options for long-term investors, but these two funds have a lot of differences you must understand before investing.
JEPI vs. VOO: Key Characteristics and Overview
VOO is a passive ETF, while JEPI is active
VOO pays qualified dividends, while JEPI doesn’t
JEPI pays monthly dividends, while VOO pays quarterly dividends
VOO has a lower expense ratio than JEPI
VOO holds 500 companies, while JEPI holds around 135
JPMorgan Equity Premium Income ETF (JEPI)
An actively managed fund by JPMorgan Chase, JEPI focuses on generating consistent income through a selection of high-quality U.S. stocks and uses covered call contracts.
Launched on May 20, 2020, it holds around 135 companies and aims to offer a stable income stream with lower volatility than the S&P 500.
Vanguard S&P 500 ETF (VOO)
Passively managed by Vanguard, VOO tracks the performance of the S&P 500 index, a benchmark for the largest and most valuable U.S. companies.
Since its launch on September 7, 2010, VOO’s objective is to match the performance of this index as closely as possible.
Expense Ratio: JEPI vs. VOO
JEPI - 0.35%
VOO - 0.03%
One of the main factors to consider when choosing an ETF is the expense ratio, as it directly impacts your returns over time.
JEPI’s expense ratio stands at 0.35%, which is somewhat high compared to other ETFs due to its active management nature.
On the other hand, VOO has an expense ratio of 0.03%, making it a low-cost investment option.
This vast difference in expense ratios means that while JEPI offers a steady income, the underlying fees could eat into your expected returns, especially for long-term investors.
Dividend Yield: JEPI vs. VOO
JEPI - 6-12%
VOO - 1.49%
Yield is an important aspect to look at, especially if you’re considering holding ETFs for the purpose of income.
JEPI stands out with an impressive dividend yield ranging from 6-12%, much higher than the average dividend yield in the market.
As a comparison, VOO has a dividend yield of about 1.49%.
JEPI’s yield might seem vastly superior, but remember this is due to its strategy of selling options on its holdings, which could limit upside potential during bullish market conditions.
Holdings Comparison: JEPI vs. VOO
While JEPI holds about 128 top-quality US stocks, VOO includes the 500 largest U.S. companies, providing a broad market exposure.
Having a vast array of holdings provides higher diversification and can soften the blow from the poor performance of a few stocks.
However, JEPI focuses on lower volatility stocks plus sells options for income, making it much less volatile.
Performance Comparison: JEPI vs. VOO
When it comes to performance, both ETFs have their strengths, which can turn into weaknesses depending on market conditions.
JEPI’s structure and income-oriented strategy might shine during volatile and bearish markets. The constant flow of option premiums coupled with any dividends from the portfolio stocks could potentially buffer some of the downturn losses, ensuring more stable returns.
However, in strong bull markets where the broad index experiences significant appreciation, VOO could outperform JEPI. VOO simply tracks the S&P 500 and would fully reap the gains of such market upturns. Besides, VOO’s structurally low cost enables better net returns.
Which is Better For You? JEPI vs. VOO
If you’re after high income and monthly dividends for retirement purposes or have a more conservative risk profile, JEPI could be a great addition to your portfolio. However, keep in mind the expense ratio could impact your net returns over time.
For those betting on the long-term growth of the U.S. large-cap market and prefer a cheap, passive strategy, VOO would be a great choice.
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