Investors looking for protection against market downside are turning toward buffer ETFs.
Investors looking for protection against market downside are turning toward buffer exchange-traded funds , also known as defined-outcome ETFs. The funds use option contracts to provide some buffer against market losses, but it doesn't come for free. "That downside protection … is coming at the cost of giving up some of the upside of the index," said Lan Anh Tran, manager research analyst at Morningstar. "That's the kind of trade off and promise that these products offer.
mountain 2023-07-01 Innovator's U.S. Equity Buffer ETF, July series since July 1, 2023 Since then competitors have followed suit, including PGIM, Allianz and BlackRock. Recently, Calamos announced a new product line of 12 ETFs that offers 100% downside protection. The first in the line, Calamos S & P 500 Structured Alt Protection ETF , began trading May 1. The firm announced that the offering has a 9.81% upside cap rate. Other ETFs will track the Nasdaq 100 and the Russell 2000 .
mountain JPMorgan Hedged Equity Laddered Overlay ETF year to date In addition, you'll have to be comfortable potentially missing out on the market's upside if the index rises above the ETF's cap. "If is going to bother you, maybe these aren't the best products for you," Sohn said. Investors are not only risking an opportunity cost by missing out on potential returns. Buffer ETF fees also tend to be higher than those of average ETFs.
Innovator Equity Defined Protection ETF - 2 Yr To Calamos S&P 500 Structured Alt Protection ETF - Ma S&P 500 Index Investment Strategy Stock Markets NASDAQ 100 Index Russell 2000 Index Jpmorgan Hedged Equity Laddered Overlay ETF Exchange-Traded Funds Business News
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