Furthermore, it gives investors the flexibility to seamlessly integrate the ETFs into their existing portfolios and allow financial advisors to offer the ETFs to investors who want the added insurance component built in. By utilizing the defined outcome strategies inherent in BJUL, PJUL and UJUL, it almost renders methods of using uncorrelated assets, such as bonds, emerging markets, or other hedging strategies arcane in comparison.
“We hear people talking about them (Defined Outcome ETFs) as a bond replacement,” said Bond. “People are concerned about bonds–they don’t want to put a lot of money into bonds right now if rates are increasing.”
The Benefits of Baking Loss Buffering Into ETFs
With the loss buffering baked into the ETF, an investor is essentially getting a level of insurance on his or her portfolio without having to actively locate an uncorrelated asset to protect against the downside vis-à-vis a motorist having to purchase brakes and air bags separate from a new vehicle. This is in stark contrast to investors who are leaving themselves exposed if the markets suddenly experience a sharp decline.
“You’re really naked in the market,” said Bond. “You’re just out there. People typically don’t have any type of protection. You’re just hoping the market delivers for you, but you have no way of knowing or protecting yourself if it doesn’t. What this (strategy) allows you to do is not walk out there completely naked, but to have exposure to the upside to a cap, and some of that protection built in.”
With a myriad of insurance products available to protect homes, vehicles and businesses, there aren’t many offerings to help investors protect their portfolios–until now. The suite of Innovator Defined Outcome ETFs gives investors peace of mind regardless of whether the bulls or bears are controlling the markets.
“We basically insure our lives up,” said Bond. “Everything is insured. We have life insurance, we have car insurance, we have medical insurance, and home insurance. We insure these things because we’re concerned a negative event could occur that will cost us.
“But the one thing we haven’t had through the ETF is the ability to protect is our portfolio–our actual assets. For many people, this is one of their most important assets.”
For more information, visit www.innovatoretfs.com.