September 14, 2025
In the world of high-income investing, two exchange-traded funds (ETFs) from J.P. Morgan have captured significant attention: the J.P. Morgan Equity Premium Income ETF (JEPI) and the J.P. Morgan Nasdaq 100 Enhanced Equity Premium Income ETF (JEPQ). While both aim to provide a steady stream of monthly income, they achieve this goal through distinct strategies and target different market segments. This comprehensive guide, based on recent data, will break down the key differences to help you decide which ETF, if any, is the right fit for your portfolio.
Understanding JEPI: The Income-Focused All-Star
JEPI, or the J.P. Morgan Equity Premium Income ETF, is a trailblazer in the covered call ETF space. Its primary objective is to generate consistent monthly income while offering some potential for capital appreciation. It achieves this through a two-pronged strategy:
- Active Stock Selection: The fund actively manages a diversified portfolio of U.S. large-cap stocks, aiming for a lower-volatility equity exposure than the S&P 500. This stock sleeve is carefully chosen to provide stability and income.
- Equity-Linked Notes (ELNs): A portion of the fund is invested in ELNs, which are structured products tied to the performance of a basket of S&P 500 options. This allows the fund to generate income by selling out-of-the-money call options on the S&P 500 without directly managing the options themselves.
Understanding JEPQ: Targeting Tech-Driven Growth and Income
JEPQ, launched more recently, follows a similar covered call strategy but with a critical difference: its underlying portfolio is based on the Nasdaq 100 Index. This gives JEPQ a strong tilt towards the technology and growth sectors.
- Nasdaq 100 Exposure: JEPQ holds a portfolio of stocks that mirror the Nasdaq 100 index, which is heavily weighted towards technology, communication services, and consumer discretionary companies.
- Enhanced Income from Options: Like JEPI, JEPQ generates income by selling call options. However, its focus on the higher-volatility Nasdaq 100 can often lead to larger option premiums and, consequently, a higher yield.
Key Differences: JEPI vs. JEPQ
| Feature | JEPI | JEPQ |
|---|---|---|
| Underlying Index | S&P 500 | Nasdaq 100 |
| Investment Focus | Income with lower volatility | Income with growth potential |
| Trailing 12-Month Dividend Yield | ~8.35% | ~10.78% |
| Volatility | Lower (more defensive) | Higher (more aggressive) |
| Key Holdings | Diversified large-cap stocks | Concentrated in Tech and Growth |
| Management Expense Ratio (MER) | 0.35% | 0.35% |
Total Returns Comparison
A look at the historical total returns provides a clearer picture of how each ETF has performed over time. Total return includes both price appreciation and dividend distributions.
| Time Period | JEPI Total Return | JEPQ Total Return |
|---|---|---|
| 1-Year | 6.62% | 15.47% |
| 3-Year | 9.62% | 19.12% |
| 5-Year | 10.76% | N/A* |
JEPI was launched in May 2020 and JEPQ was launched in May 2022, so historical data is limited.
Choosing the Right ETF for You
The choice between JEPI and JEPQ ultimately depends on your investment goals and risk tolerance.
- Choose JEPI If: You are a conservative investor seeking a consistent monthly income stream with a focus on capital preservation and lower volatility. Its diversified approach makes it a great choice for retirees or those looking to supplement their income with a more stable asset.
- Choose JEPQ If: You have a higher risk tolerance and want to gain exposure to the growth potential of the Nasdaq 100 while still generating significant income. JEPQ is suitable for investors who believe in the long-term prospects of the technology sector and can handle its higher price swings.