Thanks for these responses. The investment I'm asking about is solely for my parents. I have a low-cost stock-bond mix and a TIPS ladder. My parents don't have enough money to justify a SPIA and need their funds to be liquid.
Nisiprius, I have to admit that I hoped you would share your thoughts, and I'm grateful that you did. I'm a big fan.
I knew the underlying indexes for each 100% downside-protected Buffer ETF, along with the expense ratios, and thought it best to be comprehensive rather than selective. As I understand it, the underlying index just needs to be large and liquid enough for the firm that manages the ETF to use it as a source for the necessary derivatives; the firm that manages the ETF is accepting the derivative risk, not the firm's customers. While I have more faith in the S&P 500 than in Chinese stocks (my personal global investments are ex-China), for KWEB it is the expense ratio that concerns me, not the index.
My parents trust me to invest their money, and they have no interest in understanding the difference between a mutual fund and an ETF and an individual stock, no matter how I explain it to them or what I give them to read. What they care about is how much they have to spend and, (at best) secondarily and alarmingly, how long their money will last. Again, I am a Boglehad and they very much are not.
I've been trying to Steel Man the case for 100% downside protection Buffer ETFs. For instance, University of Connecticut’s endowment sees a place for them, as reported in UConn’s Endowment Is Abandoning Hedge Funds for New Kind of ETF (Bloomberg) and Why Endowments Like UConn Are Switching from Hedge Funds to ETFs (Institutional Investor). This isn't an appeal to authority, just one example of smart, motivated investors using Buffer ETFs to mitigate downside risk and maintain some upside exposure.
As part of Steel Manning the case for these ETFs, I'm trying to figure out is how to model the mix that I've proposed against other, similar mixes. For instance, TJAN (79 bp; 15.93% cap over two years) and ZJAN (79 bp; 7.53% cap) go on sale tomorrow, and ZDEK (79 bp; 7.97% remaining cap) has a buffer that very slightly exceeds 100%. CPSY and CPRY go on sale tomorrow (69 bp, with caps at 7.45% and 9.08%), and so does PMJA (50 bp; 7.54% cap). The iShares ETFs also have a 50 bp ER, so they could be candidates if their underlying index drops low enough.
Nisiprius, I have to admit that I hoped you would share your thoughts, and I'm grateful that you did. I'm a big fan.
I knew the underlying indexes for each 100% downside-protected Buffer ETF, along with the expense ratios, and thought it best to be comprehensive rather than selective. As I understand it, the underlying index just needs to be large and liquid enough for the firm that manages the ETF to use it as a source for the necessary derivatives; the firm that manages the ETF is accepting the derivative risk, not the firm's customers. While I have more faith in the S&P 500 than in Chinese stocks (my personal global investments are ex-China), for KWEB it is the expense ratio that concerns me, not the index.
My parents trust me to invest their money, and they have no interest in understanding the difference between a mutual fund and an ETF and an individual stock, no matter how I explain it to them or what I give them to read. What they care about is how much they have to spend and, (at best) secondarily and alarmingly, how long their money will last. Again, I am a Boglehad and they very much are not.
I've been trying to Steel Man the case for 100% downside protection Buffer ETFs. For instance, University of Connecticut’s endowment sees a place for them, as reported in UConn’s Endowment Is Abandoning Hedge Funds for New Kind of ETF (Bloomberg) and Why Endowments Like UConn Are Switching from Hedge Funds to ETFs (Institutional Investor). This isn't an appeal to authority, just one example of smart, motivated investors using Buffer ETFs to mitigate downside risk and maintain some upside exposure.
As part of Steel Manning the case for these ETFs, I'm trying to figure out is how to model the mix that I've proposed against other, similar mixes. For instance, TJAN (79 bp; 15.93% cap over two years) and ZJAN (79 bp; 7.53% cap) go on sale tomorrow, and ZDEK (79 bp; 7.97% remaining cap) has a buffer that very slightly exceeds 100%. CPSY and CPRY go on sale tomorrow (69 bp, with caps at 7.45% and 9.08%), and so does PMJA (50 bp; 7.54% cap). The iShares ETFs also have a 50 bp ER, so they could be candidates if their underlying index drops low enough.
Statistics: Posted by librarianaire — Wed Jan 01, 2025 3:36 pm — Replies 6 — Views 364