The income challenge is changing
With interest rates rising around the globe, new avenues are opening up for income-hungry investors. But the income challenge is changing rather than disappearing, so it makes sense to explore the full global opportunity set in search of yield.
Although the days of zero or near-zero interest rates are now behind us, inflation at multi-decade highs means income from bank savings and government bonds is still negative in real terms. Rising rates and the uncertain economic and geopolitical backdrop are also contributing to volatility in many markets. Investing across asset classes can help investors to build a more resilient income stream.
Dividend-paying equities may play a useful role in portfolios in rising-rate environments, complementing other income solutions. Over the long term, companies can pass rising energy costs and other input costs on to their customers in the form of higher prices, protecting their revenue and earnings streams from inflation.
In addition, dividends account for a significant share of total equity returns in volatile market environments – potentially providing a useful portfolio cushion when share prices are falling. For investors who can take on additional risk, equities could therefore be a useful part of an income portfolio.
The actively managed JPMorgan Equity Premium Income ETF (JEPI)1 pursues opportunities for consistent monthly income and appreciation, with lower volatility than the U.S. stock market.
JEPI seeks to pay out all the income the
portfolio makes on a monthly basis, net of fees. Income is derived from both
dividend and options premium – an innovative approach that aims to produce a
consistent monthly income stream, although this is not guaranteed.
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1 JPMorgan Equity Premium Income (JEPI) is the marketing name of the JPMorgan Equity Premium Income Active ETF (Managed Fund).
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