Ep. 7: Income ETF Showdown - JEPI Finished Dead Last in Total Returns

So it is officially March 1, 2026, and if you are looking at your brokerage account this morning,
you might be noticing something, well, a little uncomfortable. Yeah, uncomfortable is probably
putting it mildly for a lot of people right now. Right. The so-called safe bets, the funds that
were supposed to be the absolute bedrock of your portfolio two years ago, they aren't just stagnating.
They are actively bleeding against the broader market. It really is a moment of capitulation for
a lot of retail investors. We are seeing this massive divergence between what is popular, you know,
what gets the clicks on financial YouTube, and what is actually profitable in this 2026 economy.
And that is exactly what we need to unpack today. We've been digging through an absolute mountain of
data. Performance reports from late 2024 through yesterday, expert rankings that are frankly
upsetting the established order, and some pretty heated debates from the institutional side of things.
It is a lot to get through, but it is necessary. It is. The mission for this deep dive is pretty simple.
We are going to separate the marketing hype from the mathematical reality, and we're going to do it
by treating this as a sort of state of the union for the income investor. Because the math is brutal
right now. There's really no other way to say it. No, there isn't. Yeah. So here is the roadmap for
today. We have a data showdown of S&P 500 income ETFs that literally uncrowns the kings. We have a
brand new top 10 ranking that puts a massive fan favorite in second to last place. That one is going
to hurt some feelings. Oh, absolutely. And then we need to talk about this AI fear bin where panic
selling is creating some honestly bizarre discounts and how you can actually defend your portfolio right
now because the current market vibe is just strange. Strange is the perfect word. It is a weird
juxtaposition. You have the S&P 500 struggling to find direction. You have this palpable anxiety that
artificial intelligence is going to disrupt all these legacy businesses. And yet quietly under
the surface, there is this massive rotation into value. Right. And if you aren't paying attention to
that shift, I mean, you are just losing money. Okay, let's unpack this. And we really have to start with
the immediate pain point, the elephant in the room for the last, I don't know, three or four years
if you asked anyone how to generate income. They gave you four letters, J E P I J P Morgan's equity
premium income ETF. It is the giant in the room. It has roughly $44 billion in assets. For a very
long time, it was essentially the default setting for income investing is the easy button. Everyone bought
it. But we have a test case here, a simulation running from October, 2024 to right now March,
2026. They ran this simulation with $100,000 invested. And when you look at total returns, so that
is capital appreciation plus dividends reinvested, where did the fan favorite J E P I actually land
among its peers? This last, I mean, that is just hard to swallow for the millions of people holding it.
It is brutal. In this $100,000 test case, J E P I ended up with a capital value of about $101,234.
That is the lowest total return of the entire group tested. You barely kept up with inflation
over an 18 month period. So why is it lagging so hard? Is it just bad stock picking? Or is there
something structural that people are just completely missing? It is a bit of a mix, but the structural
issue is the tax inefficiency. And this is the part most retail investors completely gloss over until
they get their 1099 form in the mail. Right. The tax man always comes collecting. Exactly. J E P I
pays what are called ordinary dividends because of how they use equity linked notes to generate
their income. Okay. So those are taxed at your regular income tax rate, which depending on your
bracket can be quite high. Right. It is not the qualified dividend rate and it is definitely not a
return of capital. You could be paying 37% plus your state taxes on those dividends. So J E P I is
essentially running a race wearing a lead vest. The tax drag is enormous. Okay. So if the king is dead,
who is taking the throne? Because in this exact same data set while J P I was dragging its feet,
two other funds were just sprinting. And I will be honest, looking at this list, I think most
listeners have never even heard of the top performer. I would absolutely take that bet. The clear
winner for total return was GPIX. That is the Goldman Sachs S&P 500 core premium income ETF. I feel
like I never hear people talk about GPIX. You don't. And frankly, that is the opportunity. It only has
about $3.2 billion in assets compared to JPI's $44 billion. But on that same $100,000 investment
where JPI gave you $101,000, GPIX delivered a total return of $120,000. Whoa. Wait. That is a nearly
$20,000 difference in outcome over just a year and a half. That is not a rounding error. That is a
decent used car. Precisely. It is real money. And the key difference is how they get there. GPIX is
structured to allow for more capital appreciation. JPI tends to cap your upside because of how they
write their call options. GPIX lets the underlying stocks run a bit more. So you got over $108,000
in share value, growth alone, plus the income on top of that. But let's play devil's advocate for a
second. Some of our listeners are retired. They do not care if the share price goes up. They just
want that cold hard cash hitting the champion account to pay the electric bill. So the GPIX win
on pure cash payout. No, it didn't. And that is where the distinction really matters. If you
strictly want the absolute highest cash pile hitting your account, the winner was actually a tiny
fund called TSPY by tap alpha. TSPY. Okay. How tiny are we talking? Microscopic in TF terms.
It only has about $256 million in assets under management. But in our test, it paid out the highest
pure dividends. $19,683 in pure cash over the period. So let me get this straight. You have TSPY
paying almost 20 grand in cash. And GPIX growing your account to 120 grand total. Meanwhile, the $44
billion giant JEPI is sitting at the very bottom of the pile. That is the reality of the data. And
honestly, it highlights the sheer inertia of money. People buy what they know. They buy what their
friends own. They don't necessarily buy what performs best. They buy the brand name. Now for the
listener who maybe doesn't want to bet on the new guy or the tiny microscopic fund. Is there a
middle ground, a sort of Goldilocks fund? There is. And that fund is SPYI from NEOS. It has really
become the new benchmark standard for a lot of savvy investors. It landed third in total return.
But what really stands out is the consistency. It has paid exactly 52 or 53 cents every single
month for the last six months straight. And consistency is king for income investors. You really
do not want a surprise pay cut when you are relying on that money. Exactly. And unlike some of those
really wild zero DTE funds, the zero day to expiry funds like QDTE or XDTE SpyUI is incredibly
stable. Those zero DTE funds, they might pay you a huge distribution one month and then practically
pennies the next. The total roller coaster. Right. SPYI is boring. And an income investing boring
is beautiful. Plus it uses a highly tax-efficient return of capital structure. So you aren't getting
hammered like you do with GDPI. So the takeaway for this first segment is pretty clear.
Looking at the hard data from the last year and a half, your loyalty to the old giants is literally
costing you money. Absolutely. You have to look at the math, not the marketing material.
Speaking of loyalty, this next finding is going to hurt some feelings. We really need to talk about
SCHD. Yes. The absolute darling of the dividend community. I mean, for years if you went on any
investing forum or Twitter and asked what you should buy, the answer was just four letters.
SCHD. It was basically a cult. But we have a new ranking of the top 10 dividend ETFs here and it
is not looking good. No, it is not. In this very rigorous ranking, which waited total performance,
yield and diversification, SCHD landed at number nine out of 10. Number nine. That is just a stunning
fall from grace for a fund that was untouchable a couple of years ago. What happened? Did they just
pick bad stocks? It is not that they picked quote unquote bad stocks. It is that their methodology is
incredibly rigid. SCHD is ruled by a strict algorithm and that algorithm forces it to sell winners
if their yield drops too low or their valuation gets too high. So it automatically trims the flowers to
water the weeds. In a way, yes, the most painful example of this recently was Broadcom. SCHD was forced
by its rules to drop Broadcom right before the semiconductor boom really accelerated. Oh wow. Yeah,
it rotated all that money into energy and traditional value stocks exactly as tech went on and
absolute tear. So they basically sold the rocket ship right before it right before it took off
exactly. And because of that mechanical rule, its 10 year return is now lagging at about 9.1 percent.
It just missed the growth cycle entirely. Okay, so if SCHD is sitting in the corner at number nine,
who took the crown? Who is the number one dividend fund right now? This one surprised me honestly.
The new champion is FDVV, the Fidelity high dividend ETF. Fidelity, really? Because they usually
play second fiddle to Vanguard and Schwab in the passive ETF space. What is FDVV doing so differently?
The secret sauce here is what they call a barbell approach. Okay, break that down for me.
So usually a dividend fund is completely binary. You either get a high yield with practically zero growth
or you get high growth with a tiny or relevant yield. FDVV buys both. On one end of the barbell,
you have your classic boring income stocks, utilities, energy, things like that. But on the other end,
they hold massive tech dividend growers, companies like Apple, Microsoft, and yes, NVIDIA.
But NVIDIA pays a dividend? That incredibly tiny one. But because FDVV focuses on dividend growth
and the payout ratio rather than just the current yield, NVIDIA qualifies for the fund. This allowed FDVV
to capture the massive AI boom while SCHD was just sitting on the sidelines holding oil companies.
So they are capturing a respectable yield, but they aren't missing out on the tech explosion?
Exactly. And the results just speak for themselves. FDVV had the highest five-year return on the list
at 14.9%, and it's still managed in nearly 10% dividend growth rate. It's playing offense while
everyone else in the dividend space is playing defense. That is a huge distinction. And it feels like
a lot of investors get caught in what you might call yield tracks when they only play defense.
We saw SPYD on that same list, right? SPYD is the textbook example of a yield trap. It actually has
the highest yield on the entire list, sitting at about 4.3%. So it looks really juicy to a new investor.
But it sits in the bottom three for total return because there is zero underlying growth.
The share price just erodes or stagnates over time. You are getting paid a dividend,
but you are losing capital value. It is like a snake eating its own tail.
A little bit. Yeah. And then on the flip side of that trap, you have the biggest fund of them all,
VIG, the Vanguard dividend appreciation ETF. It has $121 billion in assets, but it yields 1.77%.
1.77%. I can go down to my local bank and get more than double that in the basic CD right now.
Right. VIG is not an income play for today. It is a compounder for 20 years from now.
If you need cash to pay your rent in 2026, VIG is simply not going to help you.
So we have uncrowned GPI. We have pushed SHD down the list and we have crowned FDVV.
But I want to zoom out a bit here because the broader market vibe right now in March 2026 is frankly
weird. The S&P 500 is struggling, but we are seeing this massive rotation underneath the surface.
It is being called the great value rotation. Investors are getting incredibly spooked by speculative tech
and they are fleeing to safety. While the S&P is fighting all these macro headwinds,
Vanguard's value ETS funds like VTVA, MGVVYM, they are all up over 7% year to date.
It feels a lot like 2022 all over again, where boring suddenly becomes very sexy.
It does. Money is rapidly moving into companies that actually make physical things and sell
essential services for a real profit today, not just promising some sort of AI dominance by 2030.
But here is where it gets really interesting to me. This AI anxiety isn't just hurting
the speculative tech stuff. It is heavily punishing some incredible, fundamentally sound companies,
just because the market is afraid AI might disrupt them someday.
Yes, this is absolutely my favorite part of the current market. I call it the AI fear bin.
There are these high quality dividend growth stocks that are trading at massive discounts
because of what is, frankly, irrational fear. Let's look at the first one from the research.
VISA ticker symbol V. It is down significantly year to date. Why are people selling VISA?
Two main reasons. One, there is this European payments initiative called Wero that people think
will steal market share overseas. And two, there is this general vague fear that artificial
intelligence is going to somehow replace traditional payment rails entirely. Is that a valid
fear at all? It seems wildly overblown. VISA processes $14 trillion in volume. They operate in
160 different currencies. The network effect of that infrastructure is a mode that AI cannot
just hallucinate away overnight. Based on cash flow models, it is trading at roughly a 13%
discount to fair value right now, around $361. So you are basically getting a blue chip king on sale
because people are afraid of a tech ghost story. What about a virus to your VRSK?
Now this one is down even more. About 30% over the past year. They do deep data analytics for
the insurance industry. The market narrative right now is that AI is great at data analysis,
therefore AI will naturally replace VISA. I mean, that sounds logical on the surface if chat GPT
or whatever new model can analyze data instantly. Who needs to pay VISAK?
On the surface, sure, it sounds plausible. But you have to ask a deeper question. What data
is the AI actually analyzing? AI models need training data to function. VISA actually
owns the proprietary historical claims data going back decades. You cannot just ask an AI to
underwrite a highly complex commercial property insurance policy without that proprietary history.
It will just guess. So the real mode isn't the analysis algorithm. It's the library of data.
Exactly. Various owns the library. And right now, the market is letting you buy that library at a 21%
discount. That is a very deep discount for a monopoly on data. And there was one more that I found
honestly kind of funny. Badger meter. Kicker BMI. Yes. They make physical water meters and sensors
for municipalities. Water meters. How exactly does artificial intelligence disrupt a physical water
meter buried in the ground? It doesn't. That is the sheer absurdity of the fear bin. The stock is
down 25% largely because of a minor revenue miss. But the broader market is just throwing the baby out
with the bathwater pun absolutely intended. Municipal contracts are incredibly sticky. A city
government is not going to rip out its entire water infrastructure because a tech CEO announced a
new chatbot. So we have these amazing pockets of value. VISA, Varisk, Badger meter. And even
Morningstar is pointing out giants like United Health and Mondolas trading way below fair value right
now. It really seems like we are back in a stockpickers market. We absolutely are. If you are willing
to look past the doom and gloom AI headlines, you can lock in much higher yields and vastly better
entry points than we have seen in years. Okay. So we have covered the ETFs. We have covered the
individual stocks. Now comes the million dollar question. Literally. Yeah. We saw this thought
experiment on Reddit that really blew up recently. The prompt was, if you had one million dollars
today, March 1st, 2026, how would you invest it for income? I love looking at these threads because
they give you a perfect pulse on what the retail community thinks they should do versus what the data
actually says works. And the consensus in the comments was, well, exactly what you would expect.
A mix of SCHT, JEPI, maybe some JEPQ thrown in for tech exposure. Right. The classic lazy portfolio.
Exactly. But given everything we just discussed in the first segment, that advice feels legitimately
dangerous now. It is highly suboptimal. If you put 50% of your million dollars into JEPI today,
based on the data we just covered, you are actively signing up for tax inefficiency and lower total
returns. You are leaving tens of thousands of dollars on the table just to follow the hurt.
One specific stock that keeps coming up in that million dollar debate is real T income.
The monthly dividend company, ticker symbol O. It is yielding around 6% right now. But there is
a huge fierce debate about it. The bear say real estate is dead commercial property is a nightmare
and rates are too high. The bulls just say to buy the dip. What does the data actually stand on this?
The underlying math strongly supports the bulls here. It all comes down to the spread.
Real T income borrowers money at a certain cost to capital, let's say 5% and they buy properties
that pay a higher yield, which is called the cap rate. As long as that spread remains positive,
and right now it is over 100 basis points, the dividend growth is to quote one institutional analyst
mathematically inevitable. Mathematically inevitable. I really like the sound of that when it comes to my
money. Plus you have to look at their actual tenants. They are renting to 7-11 Walgreens dollar
general. If we hit a severe recession, people are still going to buy cigarettes and aspirin and
basic groceries. A 6% yield on a company with that kind of foundational stability is very hard to
ignore regardless of what the Federal Reserve is doing with interest rates. Now let's talk about
the scarier side of having a million dollars or really any size portfolio losing it. How do you
actually defend a portfolio in 2026? Because the old standard advice of just buying a
bond tent isn't appealing to everyone anymore. And the much newer advice of buying covered
call ETFs for downside protection is actually proving to be quite dangerous. Wait really? Because
I thought covered calls were specifically supposed to buffer your downside. That is the whole sales pitch
for funds like JPI. They provide a very small buffer. But history shows that when the market actually
crashes, funds like JEPI or XYLD drop almost just as hard as the broader market. They are not a
shield. They are just a slightly softer pillow. If the S&P drops 20%, your covered call fund might
drop 18%. You are still taking a massive loss, but your upside is capped when the recovery happens.
So what is the real shield then? If it is not bonds and it is not covered calls, what do the pros do?
There are two main strategies emerging from veteran dividend investors right now. The first is what
is called the three X income buffer. Walk me through how that works. This one is for the hard core
planners. You essentially build your portfolio so that it generates three times the income you actually
need to live on. So if your monthly living expenses are $5,000, you build a portfolio that generates
$15,000 a month in cash flow. That gives you a pretty massive margin of safety. Exactly. Because if the
market collapses completely like it did in 2008 and corporate boards slash their dividends by 50%
across the board, you are still generating $7,500. You are covering your expenses without ever having
to sell a single depreciated share. You become totally immune to market price fluctuations.
That is incredible piece of mind, but that requires a lot of upfront capital to build.
It does, which brings us to the second much more accessible strategy. This one came from a veteran
with 40 years in the market. Simply put, cash is king. It sounds so simple, almost cliche,
but it is actually so hard to do in practice. Especially when everyone is worried about inflation
eating their cash. It is incredibly hard because holding cash feels like your money is doing nothing.
It feels lazy. But this veteran investor's advice was very specific. Hold enough cash that you
constantly feel under invested. Why under invested? That sounds stressful. Because that feeling of missing out
is the exact price you pay for optionality. That cash buffer is the only thing that allows you to buy
when, as he put it, the shit hits the fan. That is a really powerful reframing. Cash isn't a drag
on your portfolio returns. It is your ammunition. Exactly. When everyone else is panic selling their
visa shares and their real T income at the absolute bottom because they have margin calls with
they are just terrified, the person with the cash stack is the one picking up the bargains of a
lifetime. That cash is the ultimate portfolio defense. So let's bring this whole together. We have
covered a lot of ground today. The market in March 2026 is fundamentally structurally different from
what we saw in 2024. It really is. The set it and forget it favorites like S.C.H.D. and J.E.P.I.
are lagging heavily. The market has definitively shifted from passive beta catching the whole
market wave to a need for active value stock picking. And the winners right now reflect that.
Active strategies. Funds like GPIX for total return growth, FDVV for that balanced bar bill
approach, an individual value stocks that have been unfairly punished by this rampant AI narrative.
And honestly, it is a wake up call for the listener to stop being so passive with their own money.
You need to log in and check your holdings today. Are you holding J.E.P.I. just because a YouTuber
told you it was safe two years ago? Are you ignoring boring value stocks that are currently crushing
the S&P 500? It really puts the big institutional dogs in perspective. There was this great
analogy in the research about the massive ETFs like VIG and VYM being like the Yankees in the Dodgers.
Right. They are massive. They generate absolutely huge fees for the institutions running them.
And they are well fine. They will get you to the playoffs eventually.
But if you are an individual retail investor, you do not have to be the Yankees. You can play
money balls. You can find the mispriced assets. You can find the FDVVs and the visas while everyone
else has distracted. Precisely. The massive institutions are playing the game to collect management
fees. You should be playing to win. And right now, winning means looking where the crowd isn't.
I love that. Don't just play to participate. Play to win. But before we wrap up,
I want to leave you with one final thought to mull over. Something that wasn't explicitly in the
ETFs data today, but is looming right behind all of this. Demographics. Oh, the baby boomer retirement
wave. Exactly. Over the next five to 10 years, we are going to see the largest generation in history
moving entirely from wealth accumulation to wealth preservation. They are going to be pulling money
out of speculative growth and demanding stable cash flowing assets to fund their retirements.
That is a massive demographic title wave of capital. It is. And when that wave hits,
it might permanently reprise high quality dividend payers. So if you think a company like Realty
Income or VYRISC look like a good deal today, consider what happens when millions of retirees are
suddenly all fighting over those exact same yields. The value rotation we are seeing in 2026 might
just be the warm up act. That is a fascinating angle. The premium on reliable cash flows only going
to go up. Something to keep in mind is you review your own portfolio. But that is all we have time for
today on the deep dive. We will be back next time with more insights to keep your portfolio ahead of
the curve. Stay curious and always check those expense ratios. See you next time.