Low yields on fixed income instruments and required minimum withdrawals are scenarios retirees will tussle with next year, bringing the Nationwide Risk-Managed Income ETF (NUSI) into focus now.
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.
NUSI is a relevant consideration for retirees grappling with required minimum distributions and allocations to bonds and cash that may run too high.
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.
Breaking Down NUSI Advantages
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 is one of the few exchange traded funds designed to deliver both income and downside protection under one umbrella. With markets seemingly overdue for a correction, NUSI is a relevant consideration today.
The fund’s steady diet of monthly income can be a boon for investors looking to efficiently shore up retirement cash. That’s important because many traditional retirement vehicles have contribution limits, meaning NUSI is a consideration in taxable accounts.
“IRAs currently max out at $6,000 a year for workers under 50, while 401(k)s top out at $19,500. These limits will also remain in effect in 2021. Hitting the maximum contribution for either account could prove challenging unless you’re a super-high earner with incredible self-control,” according to the Winston Salem Journal.
For more on income strategies, visit our Retirement Income Channel.