On Monday, First Trust Advisors expanded its suite of Target Outcome ETFs with the launch of the FT Vest U.S. Equity Equal Weight Buffer ETF – December (RSDE).
RSDE’s goal is to provide investors with access to the returns from the Invesco S&P 500 Equal Weight ETF (RSP ), up to a cap. The fund has a net expense ratio of 0.85%
Upside Potential and Downside Protection
As expected from a First Trust Target Outcome ETF, RSDE invests its assets toward FLEX Options that reference RSP’s price performance. RSP utilizes a full replication strategy, and as such will generally invest in all of the securities within the S&P 500 Equal Weight Index.
Gaining exposure to RSP right now can make a great deal of sense. Many market experts are projecting equity returns to broaden next year, adding greater value potential for equally weighed strategies.
RSDE’s target outcome strategy lasts for one-year periods. During that time, the fund provides a buffer against the first 10% of losses that investors may face. However, this comes with an upside cap of roughly 14% on potential returns, before fees and expenses.
At the conclusion of each outcome period, RSDE will invest in new FLEX Options. As such, the upside cap will also likely shift for the next outcome period.
ETFs with downside buffers can offer strong value for investors heading into the new year. Funds like RSDE can help tap into upside from the S&P 500 while mitigating some of the downside risk from inflation.
A proven manager of ETF strategies, First Trust has more than 165 ETFs listed in the United States. These funds encapsulate a wide variety of investing styles, ranging from SMID caps to dividends to senior loans.
First Trust’s extensive market experience extends to its buffer ETF strategies, as well. One such example is the FT Vest Laddered Buffer ETF (BUFR ), which holds well over $5.9 billion in assets under management.
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