Home ETF News Retirees May Be Too Complacent With Risk Exposure

Retirees May Be Too Complacent With Risk Exposure

by Max Chen
Retirees May Be Too Complacent With Risk Exposure

The long bull market has helped old and young investors alike build their portfolios, but with equities pulling back, retirees should recognize the risks of being overexposed to stocks.

More older Americans have allocated a greater portion of their retirement portfolios to the stock market. According to Fidelity Investments data, 20.4 million 401(k) investors reveal that almost 40% of 401(k)s among investors age 60 to 69 hold 67% or more of their portfolios in stocks, the Wall Street Journal reports. Among clients at Vanguard Group between ages 65 and 74, 17% of these investors have 98% or more in stocks.

Financial experts have long advised young investors to allocate heavily in stocks to grow their investments during their younger years. However, as Americans near retirement age, they should begin shifting to a more balanced stock and bond mix to better hedge against bear markets heavily affecting their nest eggs.

Despite the recent selling pressure, with the S&P 500® and Nasdaq breaking into correction territories, Baby Boomers who were born between 1946 and 1964 don’t appear to be selling many stocks to balance portfolios, advisors and other financial planners warned. Older Americans actually seem emboldened by the relatively quick bounce-back from the bear markets. Additionally, many don’t see any other attractive alternatives in a low-yield environment.

“Some feel almost ho-hum about stock-market volatility,” Paul Auslander, an advisor in Clearwater, Florida, told the WSJ. “But they’re getting older and they have less time to make up for losses.”

William Bernstein, an independent financial advisor based in Eastford, Connecticut, advised retirees to assess how much stock market risk they can afford to handle. In general, for those more risk-averse, Bernstein recommended cutting equity allocation to reach one’s desired stock allocation.

“Just bite the bullet,” Bernstein told the WSJ. With the S&P 500 averaging an annual return of more than 10% over the past decade, “it’s not a bad time to be taking profits.”

As retirees look for ways to maintain their retirement accounts through their golden years, they can turn to ETF strategies like the Nationwide Nasdaq-100 Risk-Managed Income ETF (NUSI), which seeks to provide current income with a measure of downside protection.

NUSI follows a rules-based options trading strategy that seeks to produce high income using the Nasdaq-100 Index, an index of the 100 largest non-financial stocks on the Nasdaq exchange. The ETF may potentially complement traditional equity and fixed income allocations or function as a possible hedge for investors.

The Nationwide Risk-Managed Income ETF establishes a collar strategy to generate monthly income. Collar strategies involve holding shares of the underlying stock while at the same time buying protective put options and writing calls for the same security. A put option gives its owner the right but not the obligation to sell the underlying asset at a specified price and on a specified date. A call option gives its owner the right but not the obligation to buy that asset instead.

For more news, information, and strategy, visit our Retirement Income Channel.

This article was prepared as part of Nationwide’s paid sponsorship of ETF Trends.

ETFs, hedge funds, equities, bonds, and other asset classes have different risk profiles, which should be considered when investing. All investments contain risk and may lose value. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund’s return may not match or achieve a high degree of correlation with the return of the underlying index.

Call 1-800-617-0004 to request a summary prospectus and/or a prospectus. You may also download the prospectus at the link above or by visiting etf.nationwide.com. These prospectuses outline investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing.

KEY RISKS: The Fund is subject to the risks of investing in equity securities, including tracking stock (a class of common stock that “tracks” the performance of a unit or division within a larger company). A tracking stock’s value may decline even if the larger company’s stock increases in value. The Fund is subject to the risks of investing in foreign securities (currency fluctuations, political risks, differences in accounting and limited availability of information, all of which are magnified in emerging markets). The Fund may invest in more-aggressive investments such as derivatives (which create investment leverage and illiquidity and are highly volatile). The Fund employs a collared options strategy (using call and put options is speculative and can lead to losses because of adverse movements in the price or value of the reference asset). The success of the Fund’s investment strategy may depend on the effectiveness of the subadviser’s quantitative tools for screening securities and on data provided by third parties.

The Fund expects to invest a portion of its assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Fund may not be invested fully in the securities of the index or may hold securities not included in the index. The Fund frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Fund and greater tax liabilities for shareholders. The Fund may concentrate on specific sectors or industries, subjecting it to greater volatility than that of other ETFs. The Fund may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Fund’s value and total return. Although the Fund intends to invest in a variety of securities and instruments, the Fund will be considered nondiversified. Additional Fund risk includes: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.

Nasdaq-100 Index: A rules-based, market capitalization-weighted index of equity securities issued by 100 of the largest non-financial companies, with certain rules capping the influence of the largest components. It is based on exchange, and it is not an index of U.S.-based companies. Market index performance is provided by a third-party source Nationwide Funds Group deems to be reliable (Morningstar). Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses have been reflected. Individuals cannot invest directly in an index.

Nationwide Fund Advisors (NFA) is the registered investment advisor to Nationwide ETFs, which are distributed by Quasar Distributors LLC. NFA is not affiliated with any distributor, subadviser, or index provider contracted by NFA for the Nationwide ETFs.

Nationwide, the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. © 2022 Nationwide.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

MFM-4534AO; Q-20220127-0274



Source links

Related Articles

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy & Cookies Policy