INVESTING IN STOCKS CAN seem like walking a tightrope without a safety net. A new breed of exchange-traded funds aims to change that. These funds, called buffered or defined-outcome ETFs, absorb a portion of stock market losses in exchange for capping some of the gains. “This is a solution for investors who want to protect on the downside,” says Ryan Issakainen, head of ETF products at First Trust Advisers.
Other investments, such as low-volatility stock funds, also promise to cushion against market gyrations. But buffered ETFs, by investing in one-year options linked to a broad benchmark, differ in that they set exactly how much in losses—9%, 10%, 15%, 20% or 30% before fees, depending on the fund—shareholders are protected from over a 12-month period.
This story is from the June 2021 edition of Kiplinger's Personal Finance.
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This story is from the June 2021 edition of Kiplinger's Personal Finance.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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