There is a new sleeve of our portfolios that we are becoming more and more helpful. Adding to the traditional stock and bond mix, we are using Defined Outcome ETFs. Defined Outcome ETFs are buffered investments around different indexes that allow us to hedge the downside of the market to an extent while maintaining upside potential to a point. These types of investments have been around for a while, but never in an advantageous format, until now.
Previously these products have been in the format of insurance products (annuities), and bank offerings (structured notes), but carried many undesirable characteristics. High commissions and fees are paid to those selling these products so they are expensive to the consumer. Also there is almost no liquidity for these products. If you want out, you have to sell at what is usually a large discount.
The Defined Outcome products are commission free and provide intra-day liquidity. The liquidity is huge on two fronts: one because if there is ever a drastic change in the situation and a need for cash, it can be provided, two because the products can be strategically traded around the cap points to recognize the gain and start fresh on the buffer when needed.
This great addition to portfolios can help lower the volatility created by the noise of the market on your personal finances. Times of great uncertainty is when we usually see the most volatility. Defined Outcome ETFs help improve the risk adjusted performance of your investments. These investments are only available through RIA firms like Schulz Wealth. If you would like to find out more about how these products could help improve portfolios over time, we would love to talk with you.