It’s easy to get caught up in market hoopla. The recent controversy surrounding previously downtrodden video game retailer GameStop proves as much.
Tempting as it is to throw even a small amount of cash into the GameStop ring, retirement investors ought to steer clear. Those looking for a strategy that’s still exciting relative vis-à-vis old guard retirement assets, such as Treasuries and municipal bonds, may want to consider the Nationwide Risk-Managed Income ETF (NUSI).
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.
“Workers who’ve spent decades building a nest egg might look at the meteoric rises of GameStop and other speculative stocks and draw a lesson: Invest in the right company at the right time and make your fortune overnight. It’s the wrong lesson,” reports Neal Templin for Barron’s.
NUSI: Far From Speculative
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.
Translation: NUSI offers a steady stream of income and more cash than many bland retirement investments, but it also helps investors stay out of harm’s way. In other words, it’s the opposite of the GameStop situation.
“Investing in speculative stocks that have suddenly become market darlings isn’t a great strategy for long-term investors. But it’s a particularly poor one for anyone in retirement or close to it. Investors in their 20s or 30s—or even their 40s—have time to rebuild their investment portfolios after an ill-considered bet. That’s not true for older investors, particularly ones who already have begun drawing down their retirement savings,” according to Barron’s.
The Nationwide Risk-Managed Income ETF incorporates options exposure to help generate income and mitigate risk as a way to enhance total returns. Investors have long capitalized on covered call options strategies for income generation, or protective put options strategies to protect against and limit losses.
For more on income strategies, visit our Retirement Income Channel.