Low bond yields are crimping retirement portfolios, but the Nationwide Risk-Managed Income ETF (NUSI) can augment or replace some of the income bond-heavy allocations aren’t delivering for investors.
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.
“This is the case because when bond rates are low, it means that the “total return” you get from a combination of the bond’s income payments plus its price appreciation are quite limited,” writes Rob Isbitts for Forbes. “The glory days for bonds are when rates are historically high and heading lower. That was the story of the past 3 decades. However, it is not at all where things stand today.”
NUSI Nourishes Your Income
Covered call strategies can potentially augment a portfolio during periods of heightened volatility. The covered-call options allow an investor to hold a long position in an asset while simultaneously writing, or selling, call options on the same asset.
Conservative investors looking for added yield, dependable income and downside protection, which NUSI offers, are apt to find the Nationwide ETF to be an attractive addition to income-starved portfolios.
“Rates may stay low, but that will produce insufficient returns. Rates may rise and that will shock investors, as they see bonds lose significant value for the first time in their investing lives and just when they need bonds to be the “safety valve” they assume they are,” according to Forbes.
Fortunately, NUSI addresses both scenarios for investors because it’s not levered to the goings on in bond markets.
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.