What investors nearing or in retirement invest in and what millennials tap are often very different things, but some ETFs are applicable to both demographics. That group includes the Nationwide Risk-Managed Income ETF (NYSEArca: NUSI).
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.
NUSI offers investors a less volatile, income-based approach to the popular NASDAQ-100 Index and as you might have heard, that index is in style in a big way these days. It’s also widely embraced by younger investors.
“As Gen Y increasingly invests in the stock market, millennials are also making it clear they want their portfolio holdings to align with their personal beliefs and consumer priorities. For example, as the world’s first digital native generation, millennials have shown a fondness for tech stocks,” according to Nasdaq Global Indexes. “And as the preeminent index for leading tech equities, the Nasdaq-100 has benefited from the interest among millennial investors, as more shift away from traditional indexes like the S&P 500.”
In Love With Tech
NUSI avoids some of the current dividend risks with the S&P 500 because the Nationwide ETF is an income-generating spin on the Nasdaq-100 Index (NDX), an index lightly allocated dividend-offending sectors, such as energy and real estate.
“In general, millennials invest carefully and intentionally,” according to Nasdaq. “Their financial lives have been shaped by events and trends like the Great Recession and the rise in student loan debt. These impacts have influenced their primary financial goals in life.”
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.
“Millennials also like to buy into companies they are familiar with or excited by. Research from Apex Clearing found that, in addition to tech stocks, millennials were particularly active in buying shares of entertainment streaming companies and payment processors — which are products and services they use on a daily basis,” notes Nasdaq.
The Nasdaq-100 Index is heavily allocated to those types of firms.
For more on income strategies, visit our Retirement Income Channel.
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.