When it comes to retirement, the ultimate question tends to be “how much money do I need to retire?” The Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) can play a pivotal part in answering that query.
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.
With a steady monthly income stream and downside protection, NUSI helps investors elevate income levels, which is crucial in retirement.
“The rule of thumb is that you’ll need about 80 percent of your pre-retirement income when you leave your job, although that rule requires a pretty flexible thumb,” according to AARP. “The 80 percent rule comes from the fact that you will no longer be paying payroll taxes toward Social Security (although you may have to pay some taxes on your Social Security benefits), and you won’t be shoveling money into your 401(k) or other savings plan.”
More NUSI Advantages
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.
“No one knows what stocks, bonds or bank certificates of deposit will earn in the next 20 years or so,” according to AARP. “We can look at long-term historical returns to get some ideas. According to Morningstar, stocks have earned an average 10.29 percent a year since 1926 — a period that includes the Great Depression as well as the Great Recession. Bonds have earned an average 5.33 percent a year over the same time. Treasury bills, a proxy for what you might get from a bank deposit, have returned about 3 percent a year.”
What makes NUSI unique and safer option compared to some other income strategies is that it uses an options overlay to generate income, which features downside equity market protection.
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 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.
For more on income strategies, visit our Retirement Income Channel.