I've been eyeing JEPI lately, and I want to make sure I understand the risks before I invest.
I'm totally on board with the goals of the fund: targeting low volatility and regular income while also prioritizing modest capital appreciation seems like a really nice compliment to growth stocks to have in a portfolio.
However, I understand that JEPI incorporates derivatives in its strategy, and since I don't have experience with derivatives, I want to make sure I understand the risks before I get in.
In particular, I have noticed this line in the prospectus:
since ELNs are in note form, ELNs are subject to certain debt securities risks, such as credit or counterparty risk. Should the prices of the underlying instruments move in an unexpected manner, the Fund may not achieve the anticipated benefits of an investment in an ELN, and may realize losses, which could be significant and could include the Fund’s entire principal investment.
It seems like this is saying that this fund has the risk of going to zero under the right market conditions. What I want to understand is, under which market conditions could there be a bad outcome? This is a concern not only with the ELN component, but also since the fund incorporates Call Options.
Submitted June 29, 2021 at 11:51AM by pragmojo https://ift.tt/3w7ahNX
