Almost four years in, and despite countless challenges, the bull market is still going, pushing investors toward a familiar dilemma: try to capture equity gains as the market continues to rise, or take action to protect against a potential pullback, possibly giving up some of those returns? This balancing act has driven investors to look to a lesser-known corner of the exchange-traded fund (ETF) space—buffered ETFs, which aim to limit downside losses while still providing exposure to at least some upside.
Buffered ETFs have surged as an alternative to a traditional 60/40 approach to portfolio construction. These ETFs use options strategies to pre-set a certain level of downside protection over a specified period of time. While investors will have to make determinations as to whether buffered ETFs are an ideal fit based on their own risk tolerance levels, the Innovator U.S. Equity Power Buffer ETF – July (BATS: PJUL), the Innovator U.S. Equity Buffer ETF – September (BATS: BSEP), and the Innovator Nasdaq-100 10 Buffer ETF (BATS: QBUF) provide three different entry points to the space and a variety of options in terms of level of protection and potential for upside.
