JEPI vs. QYLD: Which Covered Call ETF Offers Better Returns?

 

JEPI vs. QYLD: Which Covered Call ETF Offers Better Returns?

Overview of JEPI and QYLD

The JPMorgan Equity Premium Income ETF (JEPI) and the Global X NASDAQ 100 Covered Call ETF (QYLD) are both exchange-traded funds (ETFs) that utilize covered call strategies to generate income for investors.

JEPI, launched in May 2020, aims to provide investors with a steady income stream by investing in large-cap U.S. equities with low volatility and selling options to generate additional income.

QYLD, introduced in December 2013, seeks to track the performance of the CBOE NASDAQ-100 BuyWrite V2 Index by holding a portfolio of NASDAQ 100 stocks and writing covered call options on the index.

Investment Strategies: Active vs. Passive Management

JEPI employs an active management approach, selecting stocks based on fundamental research and quantitative analysis to construct a diversified portfolio that emphasizes low volatility and high dividend yields.

In addition to stock selection, JEPI generates income by selling options, aiming to enhance returns while mitigating risk.

QYLD, on the other hand, follows a passive management strategy, replicating the CBOE NASDAQ-100 BuyWrite V2 Index by holding the stocks in the NASDAQ 100 and systematically writing at-the-money covered call options on the index.

This approach seeks to generate income through option premiums but may limit the fund's participation in significant market upswings.

Performance Comparison: Returns and Volatility

When evaluating performance, it's essential to consider both returns and volatility.

Over the past year, JEPI has delivered a total return of approximately 7.87%, slightly higher than QYLD's 6.90% return.

However, year-to-date, JEPI has achieved a modest return of 0.36%, whereas QYLD has experienced a decline of 6.07%.

In terms of volatility, JEPI exhibits lower daily standard deviation (8.62%) compared to QYLD (12.94%), indicating that JEPI's price experiences smaller fluctuations and may be considered less risky based on this measure.

Dividend Yields: Income Generation Potential

Dividend yield is a crucial factor for income-focused investors.

QYLD offers a higher dividend yield of approximately 12.48% over the trailing twelve months, whereas JEPI provides a yield of around 7.47% during the same period.

While higher yields can be attractive, they may also come with increased risk and potential for capital depreciation.

Expense Ratios: Cost Efficiency

Expense ratios impact the net returns to investors.

JEPI has a lower expense ratio of 0.35%, making it more cost-efficient compared to QYLD's expense ratio of 0.60%.

Lower expenses can contribute positively to overall investment returns over time.

Risk Considerations: Volatility and Drawdowns

Assessing risk involves examining volatility and historical drawdowns.

QYLD has experienced a higher maximum drawdown (-24.75%) compared to JEPI (-13.71%), indicating that QYLD has undergone more significant declines from its peak value.

Additionally, QYLD exhibits higher volatility (7.32%) relative to JEPI (3.91%), suggesting that QYLD's price experiences larger fluctuations and is considered to be riskier based on this measure.

Conclusion: Which ETF Suits Your Investment Goals?

Choosing between JEPI and QYLD depends on individual investment objectives and risk tolerance.

JEPI's active management, lower volatility, and cost efficiency may appeal to investors seeking a balance between income and capital preservation.

Conversely, QYLD's higher dividend yield might attract those prioritizing immediate income, though it's accompanied by higher volatility and potential for larger drawdowns.

Investors should carefully assess their financial goals and risk appetite before selecting an ETF that aligns with their investment strategy.

For more detailed information on JEPI and QYLD, you can visit their official pages:

JEPI Official Website QYLD Official Website

For a comprehensive comparison of JEPI and QYLD, consider this analysis:

JEPI vs. QYLD Comparison

Keywords: JEPI, QYLD, covered call ETF, dividend income, investment strategy