Investors looking to hedge against recent market volatility may find buffer ETFs to be a valuable asset. Bruce Bond, the CEO of Innovator ETFs, points out the advantage of buffer exchange-traded funds in providing protection from the market’s downside. According to Bond, this strategy caters to individuals who want market exposure without fully risking their investment.
Innovator ETFs release monthly buffer ETFs, such as the August ETF named PAUG, which offers 15% downside protection. This allows investors to tap into the S&P 500 while safeguarding their investment with downside protection. Bond suggests that investors hold onto these ETFs until the end of the year, as they are structured based on one-year options within the portfolio.
Mark Higgins, a senior vice president at Index Fund Advisors, expresses skepticism towards buffer ETFs and similar strategies. He believes that investors might be overcomplicating a simple problem by opting for expensive hedging solutions. Higgins suggests that investors should learn to tolerate the normal market volatility instead of relying on costly strategies like buffer ETFs.
Higgins recommends exploring more cost-effective ways to manage uncertainty in the markets. This includes refraining from checking portfolios too frequently and consulting a financial advisor before making any impulsive decisions out of fear or surprise. He emphasizes the importance of financial advisors in providing calm and guidance during times of market turbulence.
Buffer ETFs offer a unique opportunity for investors to mitigate downside risk while maintaining exposure to the market. However, it is essential to carefully consider the costs and benefits associated with these strategies. As the market continues to experience fluctuations, investors must weigh their options and seek advice from financial professionals to make informed decisions.