Rental property versus JEPQ (buying the dip...)

[HankWilliams]

Hi, Hope this question has not been asked a bunch.

I've been buying a ton of JEPQ as the market crashes. Its at around $52 today. My goal is to have at least 100k (eventually $150-200k) of it to use the dividends to pay for bills, health insurance premiums during early retirement, or feed SCHD or JEPQ (which ever is cheaper at the time).

I'm thinking of JEPQ as like having a "rental property" with these things in mind:

• Buying JEPQ at a discount with a low cost basis bc of the current crash ($52ish vs $58ish).
• Id own it in my taxable brokerage a/c bc I want access now. I'm just turned 50 yo.
• I'm aware that its treated as ordinary income/not necessarily as tax efficient (outside a Roth/HSA) as well as the higher expense ratio.
• However, JEPQ wont have tenants, tenant issues, vacancies, broken appliances/toilets/water heaters, fixing up, new roofs, closing cost of buying and eventually selling, HOA fees, attorneys, taxes, on and on. 
• And barrier to entry is cheaper. I mean, buying any rental under $200-250 is going to require bringing in contractors to redo a bathroom/kitchen.

JEPQ may not have the growth of QQQ or VTI, but I'm ok with that bc I have other ETFs growing.[/li][/list]

Again, I'm 50 yo, no debt besides renting ($1800 a month), no kids, and at the height of the market in Dec '24, I had about $1.5 million in SCHD, VTI, VGT, QQQM, SCHG, Nvidia, etc. Been heavy into the FIRE movement since 2017.

So at this point, I'm thinking of JEPQ with a low cost basis of below $55 or $54 (even without the growth of VTI or QQQM) would be a solid place to keep $100 (eventually $150-200k) and think of it like... collecting rent without the headaches.

Thanks SO much for your feedback, folks.

[uniwelder]

I don't know much about stocks or dividend funds, so here's my input as an ignorant person.  It looks like JEPQ has only been around for less than 3 years.  It sounds risky to put that much money in an unproven fund, relying on the dividend that can be cut.  What is it about JEPQ that you find appealing vs other options?

I'll admit that I do have some money in other dividend funds, like DNP (38 year history with consistent pricing and payout, 8% yield currently) and PDI (might be dumb, not sure, bought after crashing 3 years ago, paying 13% currently).  I do understand the desire for dividends, but just not sure why JEPQ.

I also have 3 rental properties, projected to provide half our retirement income, which truly diversifies things.  I don't think income from dividends is much different than stock price appreciation in many ways.  I'm hoping to learn from smarter people here about this.

[2Birds1Stone]

It's very tax inefficient in a taxable account. I can't believe I'm doing this, but here's a good Reddit thread on why it might not be the best idea.....

https://www.reddit.com/r/JEPQ/comments/17tlcgk/all_in_jepq/

[Dicey]

Like uniwelder, we have three rental properties. Like uniwelder, we appreciate the stability is adds to our portfolio. However, owning ETFs is a shit-ton easier than being a Landlord. In your shoes, I would not advise a rental. I'm not advocating specifically for JEPQ, because I don't know anything about it. What's wrong with the tried and true ETFs like VTSAX?

Here are some thoughts from JL Collins, who is an MMM fave: https://jlcollinsnh.com/2023/02/28/things-important-and-unimportant/

[vand]

I have no idea why you want to try extracting income from a growth vehicle as this ETF does.. just ridiculous pandering to people who want to have their cake and eat it or bewitched by the allure of options.

If you want income then buy stocks that pay an income.

Revolutionary idea, I know!

[ChpBstrd]

JEPQ is rather appealing right now. It has only underperformed QQQ by 3% over the past 12 months, and that is more than made up for by its 9.91% yield. The ER of 0.35% is not good, but also not bad compared to most closed-ended funds with similar characteristics.

My usual complaint with overwrite funds is that they get greedy and write calls to close to the market price. This causes their total return to usually lag just holding the index, because in bull markets they're constantly losing the call bets. I prefer to capture more stock appreciation and less option income by writing farther out, and so I've been taking a DIY approach.

Still, an extra 0.3% is not much to pay for the consistency of letting pros sell your calls for you. A DIYer like me will pay that in bid-ask spreads, or missed days when I was too busy or distracted to sell calls.

I cannot fault your overall strategy. JEPQ's call-writing income could provide some stability in the event of a sideways or down market, making up for possible losses elsewhere. Additionally, JEPQ has a relatively liquid options market itself, so you could sell calls against your shares while JEPQ is simultaneously selling calls against its assets! It's a decent candidate for an IRA.

However, I can fault your timing. We're at what I think might be the bottom of a correction. I know that I psychologically start leaning toward bonds and high-dividend stuff after seeing paper losses on my accounts. It's as if being in a foul mood directs my thoughts toward pseudo-reliable income plays. So back in the day, I would react to corrections by selling growth stocks and buying dividends or high yield bonds. I would always make this move near the bottom, and then growth stocks would immediately recover and take off without me! After about 4 washings, I detected the pattern. So I'd still with QQQ for the next 2-5 months of recovery, and switch to JEPQ after we again see ATH's.