As I get closer to retirement, the prospect of generating income from my investment portfolio is at the forefront of my mind. I’ve been researching a variety of ETFs to generate income and today I’m going to discuss JEPI and SPYI. I currently own JEPI in an IRA portfolio and I have weekly purchases setup in my account but I am also considering other options like SPYI.
Disclaimer: As always, due your own due diligence and don’t take anything you read here as investment advise. I have millions of dollars to invest and if I own something it doesn’t mean I own $1 million dollars worth of this equity. I think right now I own less than $10k of JEPI simply because it’s relatively new and I’m waiting to see how it fares during a hard market correction. Consult a financial advisor before you make any investment decisions. Also note that the information provided below came from an AI chatbot.
JEPI vs. SPYI: Key Differences
Both JPMorgan Equity Premium Income ETF (JEPI) and S&P 500 High Income ETF (SPYI) are income-focused ETFs that use covered call strategies, but they have notable differences in structure, performance, and risk.
Strategy & Approach
JEPI (JPMorgan Equity Premium Income ETF)
- Uses actively managed stock selection (not just tracking the S&P 500).
- Invests in large-cap U.S. stocks and Equity-Linked Notes (ELNs) to generate additional income.
- Smoother returns, focusing on lower volatility compared to SPYI.
SPYI (S&P 500 High Income ETF)
- Passively managed, tracks the S&P 500 but sells covered calls on it.
- Full exposure to the S&P 500 with higher upside potential but also higher risk.
- Less downside protection compared to JEPI because it doesn’t use ELNs.
Dividend Yield & Income
- JEPI: Around 7-10% annual yield, with monthly distributions.
- SPYI: Typically 10-12% annual yield, also with monthly distributions.
- SPYI has a higher yield but comes with more market volatility.
Volatility & Risk
- JEPI: Lower volatility due to diversified stock selection and ELNs.
- SPYI: Higher volatility because it’s fully exposed to the S&P 500.
Performance in Bull/Bear Markets
- JEPI: More stable in bear markets but underperforms in strong bull markets.
- SPYI: Performs better in bull markets because of full S&P 500 exposure but lacks protection in downturns.
Expense Ratio
- JEPI: 0.35%
- SPYI: 0.68% (higher due to active call options strategy)
Which One is Better for You?
- JEPI: If you want stable income with lower risk and less market correlation.
- SPYI: If you want higher income and don’t mind more volatility.
What about tax treatment between JEPI and SPYI?
Tax Treatment: JEPI vs. SPYI
Both JEPI (JPMorgan Equity Premium Income ETF) and SPYI (S&P 500 High Income ETF) generate income primarily through covered call premiums and dividends, but their tax treatment differs due to their structure.
Tax Classification of Distributions
JEPI:
Distributions may be classified as:
- Ordinary dividends (taxed as regular income)
- Qualified dividends (taxed at lower capital gains rates)
- Return of capital (ROC) (reduces cost basis and defers taxes)
- Short-term capital gains (taxed as ordinary income)
- Uses Equity-Linked Notes (ELNs), which can have complex tax treatment.
SPYI:
A large portion of distributions is from covered call premiums, which are taxed as Section 1256 contracts:
- 60% long-term capital gains (taxed at lower rates)
- 40% short-term capital gains (taxed as ordinary income)
- Offers more favorable tax treatment due to the 60/40 split.
Tax Efficiency: Which is Better?
- SPYI is generally more tax-efficient because 60% of its covered call income is taxed as long-term capital gains, which is lower than ordinary income rates.
- JEPI is less tax-efficient, as much of its income is subject to ordinary income tax rates, depending on how dividends and ELNs are classified.
Best Accounts to Hold Them
Taxable Account:
- SPYI is more tax-friendly due to the 60/40 tax split on covered calls.
- JEPI may result in higher tax liabilities due to ordinary income treatment.
Tax-Advantaged Account (IRA, Roth IRA, 401(k)):
Both JEPI & SPYI work well since taxes on distributions are deferred (Traditional IRA/401(k)) or eliminated (Roth IRA).
Final Verdict: Which is Better for Taxes?
- If held in a taxable account → SPYI is better due to its 60/40 tax treatment.
- If held in a Roth IRA or Traditional IRA → Either JEPI or SPYI works well, since tax treatment is not an issue in these accounts.
Note that there are also two “sisters” to these ETFs: JEPQ and QQQI that focus on Nasdaq/Tech stocks instead of S&P 500. While the underlying investments are different, the strategies are very similar.
Share The Wealth
Is JEPI/JEPQ or SPYI/QQQI in your portfolio? Let me know in the comments below.