The JPMorgan Nasdaq Equity Premium Income (JEPQ) ETF is doing relatively well this year in terms of inflows and total returns. It has brought in over $3.5 billion in total inflows as investors continued looking for its yield. Its inflows in January stood at $1.6 billion, followed by $1.3 billion and $634 million in the next two months.
The JEPQ ETF has also had a better performance compared to the Nasdaq 100 index. Its total return has been negative 4.78% compared to Invesco QQQ (QQQ) minus 6%. So, is JEPQ a good investment as volatility in the market rises?
What is the JEPQ ETF?
The JEPQ ETF is one of the biggest covered call ETFs in Wall Street with over $23 billion in assets.
Like JEPI, its sister fund, it helps investors gain access to the Nasdaq 100 index and superior returns.
As such, while the QQQ ETF yields less than 1%, JEPQ ETF investors receive about 10.7% in annual distributions, which come monthly. A 10% return is a big one considering that the risk-free rate of 10% stands at less than 4.5% today.
The JEPQ ETF generates its returns in two ways. It receives dividends from the portfolio companies it has invested in. At the same time, the fund makes money from using the covered call strategy.
Covered call is an approach where an investor buys an asset and then sells call options of the same asset. In this case, the JEPQ ETF sells call options of the Nasdaq 100 index, which is popular name that tracks the biggest technology companies in the US. After writing the call strategy, the fund receives a premium payment, which it distributes to investors.
Read more: JEPQ vs JEPI: Are these boomer candy ETFs good buys in 2025?
Why invest in JEPQ?
There are a few reasons why investing in JEPQ makes sense to most investors. First, the fund has constantly provided monthly dividend payouts to investors. Historically, these returns have been better than those offered by fixed assets like bonds and money market funds. As such, the fund is seen as a better alternative to these funds.
Second, the index tracks the most futuristic companies in the US. This includes companies like NVIDIA, Microsoft, and Apple that have a record of doing well. These companies have invested in most industries that will dominate future technologies.
Further, the JEPQ ETF is widely seen as a better companion for the QQQ and other tech-heavy ETFs that offer a low yield. As such, if you are invested in the QQQ, you can supplement the return by allocating your capital to the JEPQ fund for higher returns.
Third, the ETF has a correlation with the QQQ ETF, especially when you look at the total return. As shown below, the JEPQ ETF’s total return in the last three years was 41%, while the QQQ returned 39%.
The same trend has happened this year as the JEPQ’s total return was minus 4.8% compared to QQQ’s 5.9%. This means that the fund will likely continue doing well over time, especially when this correction ends.
Read more: JEPQ ETF stock sits at an all-time high: 3 catalysts to watch
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