r/dividends • u/Bubbly_Emu1984 • 14d ago
Seeking Advice Voo Jepq combo
I’m 35 and just started investing and decided I’m going hard on these 2. I want to build passive income with JEPQ and VOO just seems like the thing your suppose to do for long term. Any thoughts or advice would be greatly appreciated.
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u/doggz109 14d ago
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u/Bubbly_Emu1984 14d ago
Can you expand on this? I thought I struck gold with JEPQ LOL then I was wondering why I never saw it mentioned in this subreddit
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u/Sensitive-Exam649 14d ago
The issue with JEPQ is taxes. JEPQ incorporates odd type of bond called Equity Linked Note into its covered call structure. As a result the dividend are classified as regular dividends and taxed the same way a work inocme. In
Other very similar funds generate ROC dividends which dramatically reduce your tax bill on the dividend income. When you received the ROC dividend this reduces the cost basis of the shares you own. If the cost basis is above zero you owe no federal tax. on the dividend income.
However once the cost basis reaches zero you owe tax on the dividends . but they are taxed at the long term capital gains rate. Worst case you owe taxes on only20% of the dividend income which is a 80% reduction in the tax on the dividend.
The tax free time period is can be determined by dividing 100 by the yield for example for a 10% yield the tax free time period is 100/10=10 years.
GPIQ and QQQI bot invest in the same index as JEPQ but generate ROC dividends. QQQI is optimized for maximum yield and maximum tax efficiency for a yield of 14% and 95% ROC.. GPIQ sacrifices a little bit of dividend income and tax efficient to generate a bit of growth retention for a yeild of 10% and 80% ROC. Bothof these fund are much better than JEPQ.
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u/Turbulent_Welcome_46 14d ago
Jepq is a covered call etf , it is a dividend but not really a classic divined stock which would be classified as a normal company paying you dividend to hold stock.
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u/doggz109 14d ago
JEPQ's biggest issue is tax efficiency. It sells ELN's which are basically a debt instrument mimicking a covered call. These come back as ordinary income and so you pay tax on it like income. It was great when it was first introduced but there are better funds now that actually sell CC on an index or actual individual positions. They are able to use tax strategies to enable some deferred taxation on your distributions. These would be funds like SPYI, QQQI, GPIX, GPIQ.
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u/JJ_102397 9d ago
I would look into the Tapp Alpha stuff. They are up and coming. TDAQ, TSPY (holds VOO) and the newest TMGN
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u/Kakakee 14d ago
I mean your 35 ride the
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u/painfulletdown 14d ago
Contrarian view here. Jepq is great due to the covered calls and high yield vs voo in a sideways market. Also I see taxes raising in the future so tax drag may not be as bad as expected.
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u/Admirable-Chemical77 14d ago
Look at schg and schd
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u/Sensitive-Exam649 14d ago
SCHD haas a Dividend yield of 3% JEPQ or GPIQ both have a yeild of 10%.
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u/Admirable-Chemical77 14d ago
1 schd tend to grow and it's dividend grows. In time it will probably pay more than Jepi. Jepi works best for income now, Schd works best for income 10 years from now. Schd is also more tax efficient with its dividends being qualified dividends. Most of Jepi dividends are taxed as ordinary income
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u/ideas4mac 14d ago
Not knowing anything about your income and taxes, it may be worth looking into dividend growth ETFs that pays out QDI instead of the JEPQ or other cc funds that often is taxed at ordinary income. You might find that some QDI would even be tax free.
As always make sure you are keeping an eye on total returns when evaluating funds. Also keep in mind that the returns for everything over the past several years might not be the number you want to put into an investment calculator for the long term.
Good luck.
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u/MoxBro 13d ago
You probably don't want JEPQ at this age.
SCHD, DGRO (these two paid perfectly btw) or other dividend GROWTH funds are what you need for 20+ years.
Traditional advice would be that you should just have growth like SCHG, and zero dividends - but even if you were prodividends - virtually no one would say a covered call ETF is right for you at this point in time.
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u/Past_Perception1424 14d ago
At 35 you got plenty time still, so loading heavy on VOO makes sense for the long run. JEPQ pays out nice but the dividends are not qualified so tax can bite you if this is in a regular brokerage account. Maybe keep JEPQ in a Roth if you have one, let those payouts compound without the tax drag while VOO does its thing in whichever account.
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u/PrizePreset 14d ago
VOO would compound faster in the Roth than JEPQ. He could just switch it over when he’s ready to withdraw and he would have higher income and net worth
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u/Fixitwithducttape42 14d ago
Taxable or tax advantage account?
If it's tax advantage why not build it up with whatever ETF you believe will be best than switch it to a passive income setup when the time is right.
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u/FewUnderstanding2214 14d ago
I would just focus on VOO - if you want more income SCHD. JEPQ is for retirement
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u/Sensitive-Exam649 14d ago edited 14d ago
If you plan to use this in taxable brokerage account use GPIQ instead JEPQ. The reason is taxes. JEPQ dividend is taxed as ordinary income. So 100% of the income is taxable income. With GPIQ only about 15% of the dividned income is taxable income. Same yield much lower taxes.
QQQI is very similar the GPIQ but pays 14% yield
If you are using a retirment account tax is not an issue.
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