Not all workers have access to employer-sponsored retirement plans, such as 401(k)’s, meaning there’s some burden on advisors and investors to find new income-generating strategies. The Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) is an idea to consider.
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 its rich distribution yield of 7.81% and steady monthly income, NUSI is an ideal avenue for investors to supplement the income from workplace retirement plans or generate income in absence of those plans.
“It’s the elephant in the room in the discussion about whether there’s a retirement crisis in the United States: Even though pensions in the private sector are ebbing away and Americans are increasingly responsible for saving for their own retirements, about half of workers don’t have access to a retirement plan at work,” writes Morningstar’s Christine Benz.
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.
Today, NUSI is all the more meaningful with so many workers lacking access to traditional retirement vehicles, such as pensions and 401(k)’s.
“Some of these workers may be employed by companies that offer plans, but they’re not eligible to contribute because they’re part-time or don’t meet other criteria. Some may be self-employed, in which case they have other options for tax-sheltered retirement savings,” according to Benz.
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.
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.