These so-called derivative income funds — which include popular covered-call offerings such as the JPMorgan Equity Premium Income ETF (JEPI) — gathered $22 billion in flows last year , according to Morningstar.
"I don't see volatility drying up, especially with where inflation is and this being an election year," said Barry Martin, portfolio manager of the Shelton Equity Income Fund (EQTIX) .
"Instead of owning a covered call fund, you can buy a dividend fund that's paying 3% in dividend income," said John Rekenthaler, vice president, research at Morningstar.
Be tax conscious: Derivative income funds can bring tax complexity because they can spin out income that's subject to short-term capital gains treatment.
Comparison shop: Morningstar labels covered call funds and their ilk as "derivative income funds," but each offering will have its quirks, and this could affect its risk-return profile.
Persons:
—, Rob Schultz, JEPI, there's, Barry Martin, EQTIX, Martin, Schultz, Ashton Lawrence, Lawrence, John Rekenthaler
Organizations:
JPMorgan, Shelton, Income, CFP, Mariner Wealth Advisors, Investors, Morningstar
Locations:
Encino , California, Greenville , South Carolina