Investors looking to bolster retirement income via non-traditional sources can find a friend in the Nationwide Risk-Managed Income ETF (NYSEArca: NUSI).
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.
NUSI is particularly relevant for investors that are collecting Social Security benefits.
“If you’ve ever looked into your projected Social Security benefit, you know that living solely off your government check isn’t a great option. On average, Social Security only replaces about 40% of your working income, which spells a massive pay cut if that’s your only source of cash in retirement,” reports Catherine Brock.
Is NUSI Right for You?
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 incorporates both covered call and protective puts as a way to enhance income generation and protect against any potential downside.
A covered call refers to an options strategy where an investor writes or sells a call option on an asset which they already own or bought on a share-for-share basis to generate income via premiums derived from the sale of the call options. However, the covered call strategy caps upside potential and provides limited downside protection, so it is ideal for investors with a neutral-to-bullish outlook.
NUSI is also a vital consideration for bond investors. Fixed-income investors who are struggling with yield generation in a low-rate environment should take a look at a new risk-managed income exchange traded fund strategy that could generate improved yields relative to traditional income-focused investments.
Income investors face increased trouble with finding attractive yield-generating strategies as the steady decline in Treasury yields has made it exceedingly more difficult for investors to generate reliable streams of income from traditional bond investing.
For more on income strategies, visit our Retirement Income Channel.