The Nationwide Risk-Managed Income ETF (NUSI) offers everyday investors a professional strategy that can significantly juice income streams in retirement, a vital trait in today’s low yield world.
NUSI is an actively managed portfolio of stocks included in the Nasdaq-100 Index and an options collar. Per index rules, the fund only invests in the top 100 largest by market cap, nonfinancial stocks listed on NASDAQ. A collar strategy involves selling or writing call options and buying put options, thus generating income to hedge some downside risk. The strategy seeks to generate high current income monthly from any dividends received from the underlying stock and the option premiums retained.
“On one hand, retirees set up a “floor” of income using guaranteed payments like Social Security to cover all recurring fixed costs in retirement (insurance premiums and mortgage payments, for example),” according to CNBC. “The second prong uses an investment portfolio for discretionary spending (travel and leisure activities, for example). Retirees would dial this spending up or down based on life expectancy, ensuring their money wouldn’t run out.”
With a steady, monthly distribution and a yield well in excess of traditional equity benchmarks and 10-year Treasuries, NUSI can help retirees augment income streams.
NUSI as a Retirement Tool
NUSI can act as a complement to traditional equity and fixed income allocations or as the ideal protective hedge for investors with heavy exposure to technology and growth stocks because the fund is a “rules-based options trading strategy that seeks to produce high income using the Nasdaq-100 Index,” according to Nationwide.
“Retirees should, at a minimum, determine what their fixed costs will be in their retirement years. That’s the ‘floor’ income, encompassing all essential monthly and annual payments like housing, food, utilities, and transportation,” reports CNBC.
The Nationwide Risk-Managed Income ETF uses an options trading strategy called a protective net-credit collar to generate income. The options strategy sells an upside call option and uses a portion of the proceeds received to buy a put option to hedge downside risk on an underlying portfolio of securities.
NUSI can also help investors with Social Security conundrums, such as the important decision regarding when to claim benefits.
“Consider someone who turns 62 this year and stands to get about $1,000 per month from Social Security at age 67. This individual would get $716 a month at age 62, but a much larger monthly sum — $1,266 — by waiting until age 70, according to the Social Security Administration,” reports CNBC.