Individuals across the country dream of retiring early, but many don’t where to find the tools to successfully navigate the journey. A potential starting point is the Nationwide Risk-Managed Income ETF (NYSEArca: NUSI), an exchange traded fund relevant to investors of all ages.
NUSI can act as a complement to traditional equity and fixed income allocations, or as the protective hedge for investors with heavy exposure to technology and growth stocks. The fund is a rules-based options trading strategy that seeks to produce high income using the Nasdaq-100 Index.
NUSI is one of the few exchange traded funds designed to deliver both income and downside protection under one umbrella. With markets seemingly overdue for a correction, NUSI is a relevant consideration today.
“While more than 18 million people in the U.S. continue to collect unemployment benefits, the pandemic has led some more fortunate American workers to save money and even plan for an early retirement,” reports Gabriel Cortes for CNBC. “The transition to remote work while earning a pre-pandemic income has encouraged less spending and more storing up for another day. Personal savings hit a historic high in April when economic uncertainty prompted more Americans to stockpile cash, and while the personal savings rate has fallen significantly since then, it’s still at levels not seen since 1975.”
Road to Retirement
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 seeking to generate 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 is also appealing to a younger demographic.
“Millennials are digital natives, and many of them transitioned to remote work without much problem. Some ditched pricey apartments in expensive cities and moved to cheaper areas or even back home with their parents,” according to CNBC.
The Nationwide Risk-Managed Income ETF uses 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.
Nasdaq-100 Index – A basket of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange.
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.
Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period.
A put is an options contract that gives the owner the right, but not the obligation, to sell a certain amount of the underlying asset, at a set price within a specific time.
Net Credit Collar – when the premiums received are greater than the premiums paid and net debit is when the premiums paid are greater than the premiums received. BEP = Underlying stock purchase price + Net debit.
This article was prepared as part of Nationwide’s paid sponsorship of ETF Trends.
Performance data quoted represents past performance; past performance does not guarantee future results. Index performance is not illustrative of fund performance. One cannot invest directly in an index. Please call 1-877-893-1830 for fund performance.
ETFs, hedge funds, equities, bonds, and other asset classes have different risk profiles, which should be considered when investing. All investments contain risk and may lose value. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund’s return may not match or achieve a high degree of correlation with the return of the underlying index.
NUSI Prospectus (hyperlink to: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NUSI/index.html )
Call 1-800-617-0004 to request a summary prospectus and/or a prospectus. You may also download the prospectus at the link above or by visiting etf.nationwide.com. These prospectuses outline investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing.
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.
Nationwide Fund Advisors (NFA) is the registered investment advisor to Nationwide ETFs, which are distributed by Quasar Distributors LLC. NFA is not affiliate with any distributor, subadviser, or index provider contracted by NFA for the Nationwide ETFs.
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