Many young investors aren’t thinking about retirement, but that’s a mistake and many younger market participants are making that mistake because they don’t view retirement strategies as alluring. The Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) can flip that script because the ETF provides income-based exposure to one of the hottest benchmarks in the U.S.
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.
“Most of us think of retirement as something to look forward to when we’re in our 60s. That’s when the majority of workers will retire. But it’s not the only time. Increasingly, people are having to wait until their 70s to retire because they didn’t plan early enough for retirement to save the money necessary to live without a job,” writes University of Mary Washington Business School Dean Lynn Richardson.
Why NUSI Matters Now
NUSI’s exposure to the NASDA-100 is relevant for multiple reasons. First, that index has nearly doubled since the end of 2018. Second, it has a low yield, making NUSI an attractive way of gaining exposure to that high-flying benchmark.
“So whatever your age, start planning your retirement today. If you’re already retired, are you excelling in this chapter of your life, or are you failing? Each of us wants to earn an ‘A’ grade in every stage of our life, including retirement. By doing some advance planning and considering all of these aspects of life after our careers, we can do it,” notes Richardson.
The Nationwide Risk-Managed Income ETF will use 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.
Covered call strategies can potentially augment a portfolio during periods of heightened volatility. The covered-call options allow an investor to hold a long position in an asset while simultaneously writing, or selling, call options on the same asset.
NUSI aims for high monthly income generation, portfolio volatility reduction, reduced duration risk, and interest rate sensitivity, capital appreciation from equity participation, downside risk mitigation, and enhanced tax efficiency of index options.
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.