The Clap
Demand for buffer ETFs is increasing as market uncertainty shakes investors’ confidence.
The Deets
Buffer ETFs have recorded $6 billion in inflows.
What are Buffer ETFs
Buffer ETFs protect investors from market downside and have been gaining more popularity during times of market instability. Buffer ETFs give investors an opportunity to reduce risk but at the expense of reducing potential gains.
Effectiveness of the Strategy
Innovator U.S. Equity Power Buffer ETF (PJAN), a buffer ETF, was down 5.7% Year to date while the S&P 500 was down 15%. When the S&P 500 was down 23% earlier this year, the ETF was only down 11%.
This highlights the effectiveness of buffer ETFs in mitigating risk.
Downside of the Strategy
While they are lower risk, buffer ETFs will lose money if markets continue to fall. They are mainly effective at the beginning of a market downslide.
Buffer Funds looking more lucrative? 🦺
