JEPQ High Income ETF to REPLACE the QQQ in 2024 (DO THIS NOW)

Summary

The video discusses using the JPMorgan Equity Premium Income ETF (JEPQ) to rebalance portfolio risk in the current economic environment. It explains how JEPQ provides exposure to AI and tech growth while also generating substantial dividend income to cushion volatility. The host analyzes JEPQ's performance compared to QQQ and S&P500, noting its lower volatility and competitive total returns. With high rates pressuring value stocks, the video advocates holding JEPQ for continued tech exposure rather than rotating fully to value, using the dividends as cash reserves to DCA if a correction occurs.

Takeaways

• 😀 JEQ ETF provides strong exposure to AI growth while cushioning volatility
• 💡 JEQ dampens QQQ volatility through covered calls and secondary screening
• 📈 JEQ has outperformed S&P 500 since inception and kept pace with QQQ
• 👍 JEQ's 10% dividend yield gives extra protection against market drops
• ⚠️ Rising rates negatively impact value stocks - avoid rotating into them
• 🤔 Psychological challenge of buying at all-time highs - JEQ helps ease this
• 🔄 JEQ good for portfolio rebalancing to balance growth and risk mitigation
• 💰 Accumulate JEQ's dividends in cash to DCA back in case of correction
• 🗓 October 2024 predicted as period of high volatility - worth watching
• 😊 JEQ or HSKA good alternatives to QQQ for dampened volatility

Q & A

What are some benefits of high income ETFs?

High income ETFs provide consistent cash flow, which is especially beneficial for retirees and income investors. They also allow for portfolio rotation and rebalancing to mitigate volatility.

Why is portfolio rotation difficult in the current economy?

Growth stocks related to AI are continuing to rally to all-time highs. Meanwhile, rising interest rates are negatively impacting value stocks, making a rotation from growth to value less appealing.

How does the JEPI ETF work?

JEPI invests in the NASDAQ 100 and sells out of the money call options against its holdings to generate income. It uses equity-linked notes rather than stock options, so no shares are called away.

How has JEPI performed compared to QQQ?

JEPI has outperformed the S&P 500 since inception and kept pace with QQQ despite using covered calls. It cushions volatility while still allowing strong growth potential.

How does JEPI lower volatility?

JEPI screens and weights its holdings differently than QQQ to be less top-heavy. It also generates significant dividend income. Together, these lower annualized volatility by 40% vs QQQ.

Why is JEPI a good choice for rebalancing now?

It provides continued exposure to AI/tech growth while also mitigating downside risk. The dividend income can be held as cash to dollar cost average back into growth stocks if a correction occurs.

What is the vix term structure suggesting about late 2024?

The vix term structure shows investors are pricing in high volatility in October 2024, possibly due to the election. This is a key risk event for investors to monitor.

Would value ETFs be a good sector to rotate into now?

No, rising interest rates and other factors are creating additional downward pressure on value stocks. Rotating into value would be an inferior choice currently.

What should investors do if JEPI seems too risky?

For even lower volatility, the QYLD ETF is another alternative. It dampens QQQ volatility more than JEPI, while still providing tech exposure.

Outside of a black swan event, what is the outlook for AI stocks?

The AI movement continues to grow rapidly. Unless a major unexpected event occurs, this momentum likely persists for some time still.