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  • Writer's pictureWiseWallet

Income Strategies Compared: JEPI vs. SCHD ETFs



When it comes to building a robust investment portfolio, selecting the right ETFs can make all the difference. If you’ve been following our blog, you might have already checked out our in-depth analyses on two standout funds: SCHD: One of the Best Dividend Income Funds for Your Retirement and JEPI: High Income and Stability in One Fund. In this post, we'll compare these two ETFs to help you decide which one best aligns with your investment goals.


What?

Investors often seek ETFs that can offer both income and growth potential, and JEPI (JPMorgan Equity Premium Income ETF) and SCHD (Schwab U.S. Dividend Equity ETF) are among the top choices. These two ETFs have distinct strategies and objectives that cater to different investor needs to generate income streams.

  • JEPI focuses on generating income through a unique approach that combines a diversified portfolio of high-quality stocks with a premium income strategy by selling call options. It aims to provide monthly income distributions and reduce volatility.

  • SCHD is designed to track the performance of the Dow Jones U.S. Dividend 100 Index, which includes high dividend-paying U.S. stocks. It focuses on companies with a solid track record of consistent and growing dividends.

 

So What?

JEPI is a relatively new ETF (inception: 5/20/2020) compared to SCHD (inception: 10/20/2011). Let's compare the performance of SCHD and JEPI since JEPI's inception.

 


Since JEPI's inception, SCHD has clearly outperformed JEPI while managing the market's volatility reasonably well. The table below shows the comparison of yields since JEPI's inception. JEPI has consistently delivered much higher yields than SCHD, with 2-3 times higher yields except in 2020.


Understanding the differences between JEPI and SCHD can help you make an informed decision about which ETF aligns better with your investment goals.

  • Income Generation: JEPI's premium income strategy is designed to generate higher income through options premiums, making it appealing for income-focused investors. SCHD, on the other hand, provides a steady income stream through dividends from established companies.

  • Risk and Volatility: JEPI's strategy includes options trading, which can reduce volatility but also adds a layer of complexity and risk. SCHD has a simpler strategy, focusing on high-quality dividend-paying stocks, which tend to offer lower volatility and more predictable performance.

  • Growth Potential: While JEPI aims for both income and some growth, its primary focus is income generation. SCHD, with its emphasis on dividend growth, provides a balance of income and potential for higher capital appreciation over time.

  • Management and Expenses: JEPI has a higher expense ratio (0.35%) compared to SCHD (0.06%) due to its active management and premium income strategy. SCHD, being passively managed, typically has lower fees.

 

Now What?

Deciding between JEPI and SCHD depends on your individual investment objectives and risk tolerance.

  • If You Seek Higher Income: JEPI might be a better fit for you, especially if you prioritize monthly income distributions and are comfortable with a more complex investment strategy.

  • If You Prefer Stability and Growth: SCHD could be the way to go if you value a steady stream of dividends, lower fees, and potential for higher long-term capital appreciation.

  • Portfolio Diversification: Consider including both JEPI and SCHD in your portfolio to balance income and growth. This approach can provide a diversified income stream while participating in the growth of high-quality dividend-paying stocks.

 

Concluding Remarks

Both JEPI and SCHD offer compelling benefits for investors, but their suitability depends on your specific financial goals and risk appetite. By understanding the distinct strategies and potential outcomes of each ETF, you can make a more informed decision that aligns with your investment strategy. As always, it's important to consult with your financial advisor to ensure that your investment choices are tailored to your individual financial situation and goals.

 


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