The Nationwide Risk-Managed Income ETF (NUSI) doesn’t just bolster retirement income. The fund also helps retirees mitigate volatility, which can be onerous in the search for added income streams.
The Nationwide Risk-Managed Income ETF will use 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. Some market observers see volatility increasing as 2020 moves along.
“In addition, in spite of the market’s rebound since March, LPL Financial says there is significant downside risk in the U.S. and global equity markets. The firm says stocks are overvalued and that the recovery may not be V-shaped, as many have predicted,” reports Plan Sponsor.
Specifically, the ETF will try to achieve high monthly income generation, portfolio volatility reduction, reduced duration risk, and interest rate sensitivity, capital appreciation from equity participation, downside risk mitigation and enhanced tax efficiency of index options. NUSI’s downside protection in today’s environment.
NUSI Excels in Trying Times
“American Century Investments surveyed retirement plan participants in March, just when the coronavirus pandemic was taking hold, and discovered that market risk was participants’ biggest concern, cited by 40% of participants,” according to PlanSponsor.
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.
NUSI aims for high monthly income generation, portfolio volatility reduction, reduced duration risk, and interest rate sensitivity, capital appreciation from equity participation, downside risk mitigation and enhanced tax efficiency of index options.
Another area was NUSI with its distribution yield of 7.81% is useful in retirement longevity because many retirees are concerned about outliving their money. NUSI’s steady level of income can mitigate those concerns.