It is never too late to start your investment journey, and if you’re a beginner, investing in exchange-traded funds (ETFs) can be a great choice. ETFs can be ideal for investors due to the instant diversification, low expense ratio, and wide variety of investment choices. They also have the potential to generate passive income along with capital appreciation. If passive income is your goal, consider JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI), Invesco S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD), and Global X SuperDividend ETF (NYSEARCA:SDIV). Here’s why they make a great addition to a beginner’s portfolio.
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JPMorgan Equity Premium Income ETF (JEPI) generates its 7.24% yield primarily through writing out-of-the-money call options on the S&P 500.
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JEPI holds $41B in assets and has delivered a 67.96% five-year return.
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Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) selects 50 stocks from the 75 highest-yielding S&P 500 companies with the lowest 12-month volatility.
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If you can handle some amount of risk, the JPMorgan Equity Premium Income ETF is a worthwhile choice. It aims to deliver steady income while providing exposure to some of the best blue-chip stocks with little volatility.
JEPI is known for a two-part strategy where it builds a portfolio of top stocks using a risk-adjusted system. Second, it writes out-of-the-money call options on the S&P 500 index and generates a premium. This premium allows it to maintain a high yield.
The fund has about $41 billion in assets under management, and while many may assume it leans on the high-dividend stocks, it generates passive income through the premium generated on options calls. It does hold defensive stocks, but the majority of its income stream is from writing out-of-the-money call options.
JEPI has a dividend yield of 7.24% and an expense ratio of 0.35%. It has managed to offer investors a bond-like return along with equity-like gains at low volatility.
JEPI invests in 123 stocks and has the highest allocation to the information technology sector (14.9%), followed by health care (12.4%) and industrials (11.8%). Its top holdings include Alphabet, Microsoft, AbbVie, Johnson & Johnson, Nvidia, and Amazon. The ETF has generated a cumulative 3-year return of 34.30% and a 5-year return of 67.96%.
