When it comes to income-generating exchange traded funds, the Nationwide Risk-Managed Income ETF (NUSI) offers investors a host of benefits that are becoming increasingly clear in today’s challenging macroeconomic environment.
Owing to the coronavirus pandemic, unemployment is high relative to recent averages. While that situation is improving, many households are down to just one income. That could crimp retirement savings, but NUSI represents a practical avenue for staying on track with retirement.
“Saving for two when one spouse is the primary breadwinner or a stay-at-home parent can be challenging depending on your income. Fortunately, with proper planning, an eye on expenses, and enough time, couples can still save for retirement when one spouse stays home,” according to Forbes.
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.
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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. The fund is a “rules-based options trading strategy that seeks to produce high income using the Nasdaq-100 Index,” according to Nationwide.
“But for couples living on one income, the challenge is usually having enough extra money to save for retirement. It’s important to pay yourself first by funding savings goals before other non-essential expenses,” reports Forbes.
NUSI, which delivers steady monthly income, delivers income via covered calls.
A covered call refers to an options strategy where an investor writes or sells a call option on an asset which they already own or bought on a share-for-share basis to generate income via premiums derived from the sale of the call options. However, the covered call strategy caps upside potential and provides limited downside protection, so it is ideal for investors with a neutral-to-bullish outlook.
For more on income strategies, visit our Retirement Income Channel.