Should You Invest in Defined Outcome Buffer ETFs?
Money For the Rest of Us
J. David Stein
4.3 • 1.3K Ratings
🗓️ 10 July 2024
⏱️ 32 minutes
🔗️ Recording | iTunes | RSS
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Summary
Buffer ETFs protect against the downside while capping the upside. We examine them closely to see if they are worth it.
Topics covered include:
- How buffer ETFs are structured and some current examples
- How buffer ETFs have performed over the past five years
- What are the risks of buffer ETFs
- How loss aversion and narrow framing contribute to the popularity of buffer ETFs
- Are buffer ETFs worth it and what are some alternative strategies that could be used instead
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Show Notes
BlackRock Enters Booming Market for Stock ETFs With a 100% Hedge by Emily Graffeo—Bloomberg
New Stock ETF Offers 100% Hedge as Buffer Funds Nab $46 Billion by Emily Graffeo—Bloomberg
Monetizing Loss Aversion for Fun and Profit—Paul Kedrosky
Investments Mentioned
Innovator U.S. Equity Ultra Buffer ETF - January Series (UJAN)
Innovator U.S. Equity Ultra Buffer ETF - June Series (UJUN)
iShares Large Cap Max Buffer Jun ETF (MAXJ)
Innovator U.S. Equity Accelerated 9 Buffer ETF (XBJL)
SPDR S&P 500 ETF Trust (SPY)
Related Episodes
460: Should You Be Invested 100% in Stocks Before and During Retirement? A Recent Study Says Yes.
451: How Much Should You Invest in Stocks? The Art of Position Sizing in a Volatile Market
394: How to Get Better at Risk Taking
321: How to Analyze Complex Investments
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Transcript
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| 0:00.0 | Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. |
| 0:10.0 | I'm your host David Stein. Today is episode 485. It's titled, |
| 0:14.4 | Should you invest in defined outcome buffer EDFs? |
| 0:19.2 | One of the things that we do at Money for the Rest of us |
| 0:21.6 | is monitor new investment products that may help us |
| 0:26.4 | in managing our investment portfolios, hopefully generate higher returns at lower risk. |
| 0:34.0 | Over five years ago, in Plus Episode 240, |
| 0:37.8 | we looked at one of these new investment products. |
| 0:41.3 | We'll often do those more detailed, maybe technical discussions in our |
| 0:48.8 | plus episodes that we release to members of our money for the rest of those plus community |
| 0:53.4 | just because sometimes it works better to get in the weeds in those episodes. |
| 0:58.4 | So this was a brand new product. |
| 0:59.9 | It was called the Innovators' S&P 500 Ultra Buffer E.T. |
| 1:05.8 | It was the January series and it had the ticker UJAN. |
| 1:10.6 | This was, as far as I'm aware, the first buffer or defined outcome ETF released. |
| 1:18.0 | A defined outcome exchange traded fund, also known as a buffer EDF, it's a publicly traded security. |
| 1:24.7 | It has a fixed maturity date in that the time period or the outcome period is set. |
| 1:32.1 | The EDF will provide exposure to an equity market index. |
| 1:36.8 | It could be the S&P 500. It could be an E.T. |
| 1:39.5 | That tracks the S&P 500 or the NASDAQ 100. You get exposure to that index, the upside up to a cap, but you also |
| 1:47.9 | get some protection on the downside and that's the downside buffer. |
| 1:53.0 | So there's two components to these defined outcome ETS. |
... |
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