This article was written with the assistance of generative AI.
This week, VettaFi hosted a webcast in partnership with Swan Global. The educational focus was on the challenges of achieving sustainable income and the benefits of an options-based strategy. The day of the virtual event, the Swan Global Enhanced Dividend Income Strategy (SCLZ) began trading.
SCLZ combines Swan Global’s expertise in options trading with O’Shares Investment’s experience in stock selection of quality stocks with a history of dividend growth. Joining Swan Global’s Jeff Thomas and Chris Hausman were Kevin O’Leary and Connor O’Brien of O’Shares ETF Investments. I moderated the event.
Thomas referred to the combination of the two firms during the webcast as peanut butter and chocolate forming a Reese’s. Swan also offers the Swan Global Hedged Equity US Large Cap ETF (HEGD), a $230 million options-based ETF, as well as mutual funds and separate accounts.
Here are some key takeaways from the event:
- Sustainable Retirement Income Strategies: The webinar focused on advisors achieving sustainable income for retirement, regardless of the Federal Reserve’s policy. When asked what they would consider a sustainable target income percentage for retirement, nearly half of respondents (47%) chose 5%-7%. A smaller group (23%) selected 8% or higher.
- Active Management: The importance of active management in achieving sustainable income was emphasized. The Swan Global team takes an active approach by managing options on individual stocks with high income potential. Swan uses a rules-based approach to manage risk. During the webcast, most advisor participants (76%) indicated they used a combination of active and passive income strategies. Far fewer chose passive or active.
- Profitability-Based Stock Index: The index behind SCLZ focuses on quality stocks based on a measure of profitability. During the webcast, data was shown that companies with higher profit levels tend to outperform.
- Dividend Growth Prioritization: The index starts with 500 large-cap stocks, scores them based on quality metrics, and then selects the top 50 prioritizing dividend growth. The weighting methodology is a blend of market cap weight and equal weight to ensure large stocks do not dominate the index.
- Preference for Boring Companies: O’Leary is also known as Mr. Wonderful from the TV show “Shark Tank.” He endorsed this methodology for its focus on quality companies that make money and distribute dividends. He believes that such boring companies should form the core of an investor’s portfolio, especially in uncertain times. Recently Apple, Microsoft, Eli Lilly, Visa, and Broadcom were the largest holdings in the index.
You can register to catch a replay from the VettaFi virtual event to learn more.
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