As investors hit their golden years, it is important to shift gears and maintain a different mindset with your investment goals.
“At retirement, other than Social Security, the regular income is gone (other than for the rare individuals who have guaranteed pensions). Now you are mostly dependent on a pool of savings. This money must supply enough annual income to support your desired lifestyle and do so for your entire remaining (maybe joint with a spouse) lifetime. And you have so much more time to ‘watch’ your portfolio and worry about it,” Steven Podnos, a financial planner in Central Florida, writes for Florida Today.
Consequently, the gyrations in the markets, especially during corrections or a steep bearish pullback, could cause some anxiety.
Most retirees need to remain disciplined and stay invested during the market volatility, or investors will require someone to help them.
“Trying to time the market’s swings will almost certainly accelerate your losses,” Podnos said.
Additionally, retirees could maintain safer fixed-income assets to help weather the storm or remain a solid foundation for an investment portfolio.
The Retirement Bucket
“Many advisors favor a ‘retirement bucket’ approach-which is a pool of fixed income that can provide several years of desired distributions regardless of what the stock market is doing. This may be a drag on performance (especially now with ultra-low interest rates) but adds a great deal of safety.” Podnos added.
ETF investors can look to something like the Nationwide Risk-Managed Income ETF (NYSE Arca: NUSI), which seeks to provide current income with a measure of downside protection.
NUSI follows a rules-based options trading strategy that seeks to produce high income using the Nasdaq-100 Index, an index of the 100 largest non-financial stocks on the Nasdaq exchange. The ETF potentially may complement traditional equity and fixed income allocations or function as a possible hedge for investors.
The Nationwide Risk-Managed Income ETF establishes a collar strategy to generate monthly income. Collar strategies involve holding shares of the underlying stock while at the same time buying protective put options and writing calls for the same security. A put option gives its owner the right but not the obligation to sell the underlying asset at a specified price and on a specified date. A call option gives its owner the right but not the obligation to buy that asset instead.
For more news, information, and strategy, visit our Retirement Income Channel.
This article was prepared as part of Nationwide’s paid sponsorship of ETF Trends.
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KEY RISKS: The Fund is subject to the risks of investing in equity securities, including tracking stock (a class of common stock that “tracks” the performance of a unit or division within a larger company). A tracking stock’s value may decline even if the larger company’s stock increases in value. The Fund is subject to the risks of investing in foreign securities (currency fluctuations, political risks, differences in accounting and limited availability of information, all of which are magnified in emerging markets). The Fund may invest in more-aggressive investments such as derivatives (which create investment leverage and illiquidity and are highly volatile). The Fund employs a collared options strategy (using call and put options is speculative and can lead to losses because of adverse movements in the price or value of the reference asset). The success of the Fund’s investment strategy may depend on the effectiveness of the subadviser’s quantitative tools for screening securities and on data provided by third parties.
The Fund expects to invest a portion of its assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Fund may not be invested fully in the securities of the index or may hold securities not included in the index. The Fund frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Fund and greater tax liabilities for shareholders. The Fund may concentrate on specific sectors or industries, subjecting it to greater volatility than that of other ETFs. The Fund may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Fund’s value and total return. Although the Fund intends to invest in a variety of securities and instruments, the Fund will be considered nondiversified. Additional Fund risk includes: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.
Nasdaq-100 Index: An unmanaged, market capitalization-weighted index of equity securities issued by 100 of the largest non-financial companies, with certain rules capping the influence of the largest components. It is based on exchange, and it is not an index of U.S.-based companies. Market index performance is provided by a third-party source Nationwide Funds Group deems to be reliable (Morningstar). Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses have been reflected. Individuals cannot invest directly in an index.
Collar – an options trading strategy that is constructed by holding shares of the underlying stock while simultaneously buying protective puts and selling call options against that holding.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.