High yield funds may involve risks. In a perfect world, all sky-high dividend yields would be a direct result of strong companies generating lots of excess cash profits. In the real world, it is more often associated with declining stock prices or companies in serious financial distress. As a result, high yields tend to be combined with disappointing price charts and modest total returns at best.
What if I told you that the largest income-focused exchange traded fund (ETF) on the market today combines generous yields with impressive fund price appreciation? JPMorgan Nasdaq Stock Premium Income ETF (NASDAQ:JEPQ) It checks both the shareholder-friendly boxes and many more.
Premium Income ETF is a very young fund, established in May 2022. And because it’s an actively managed fund, you may have skipped this fund in the vast sea of income-producing ETFs. Passive index funds tend to have lower annual fees, so it makes sense to start evaluating funds on that basis.
But this JP Morgan This product may be worth paying the 0.35% administration fee. Here’s a quick summary of the fund’s unique attributes:
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Premium Income ETF’s experienced management team relies on data science to select high-income stocks from growth-oriented stocks. Nasdaq 100 market index.
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Currently, 54% of the portfolio is invested in information technology and communications services, two market sectors closely linked to the ongoing artificial intelligence (AI) boom.
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The top 10 holdings include: Complete list of “Magnificent 7” stocks — Proven winners with very large market caps.
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While some of these tech giants don’t pay dividends, fund managers still derive monthly income from them in other ways.
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The annual dividend yield rose above 12% over the summer and is now at 9.3%.
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Despite the market’s short history, it manages a huge amount of assets of $20.7 billion. Investors quickly embraced this promising new fund.
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Ways to increase dividends include some dangerous tricks, such as selling short-term call options to generate payouts from volatile stocks. That would be great if it worked, but it could also hurt the fund’s performance. and A decline in yields due to a prolonged market downturn.
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This fund was established a few months ago this bull market I started. Economic downturns have yet to be tested and could expose the downside of options-based investment tactics.
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While a 0.35% management fee may not seem like a lot, it is much higher than the 0.06% average for today’s 10 largest ETFs. Vanguard S&P 500 ETF (NYSEMKT: VOO). In fact, fees can make a big difference in the long run. The Vanguard Fund’s annual fee of 0.03% will add up to 0.3% over 10 years, while the Premium Income ETF’s fees will total 3.6% over the same period.
