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Balchunas told GOBankingRates in a phone interview that he calls these candy funds, as they are somewhat irresistible.
Its almost like these were made from an ETF laboratory, he said.
Its the latest science.
They have a problem these ETFs solve that problem which is psychological, said Balchunas.
They hit all the receptors in the boomers brain.
you’ve got the option to invest with no or little downside.
This protection saves the day, and boomers go gaga for that concept.
Two Strategies
There are two main strategies for these ETFs and they are offered by many companies.
The first strategy, according to theWall Street Journal, is the equity premium income, or covered call.
The other strategy involves so-called buffer funds, which use derivatives.
These provide downside protection to investors, said Zheng.
As Mary Poppins said, A spoonful of sugar helps the medicine go down,' added Codola.
What Are the Risks?
For example, if the strategy is yielding 8% then it would only be down 22%.
He also noted that they are complex and can come with higher fees compared totraditional index funds.
The higher costs can eat into the returns over time, he explained.
If you miss out on the best of the markets upside, your financial security could be at risk.
But clients want it its agrassroots psychological appeal, he said.
But again, boomers dont want to be out of the game.
They think theyll get FOMO, Balchunas said, adding that boomers will pay up for peace of mind.
You have capitalism in action and thats not a bad thing, he concluded.
The numbers speak for themselves.
Just in the past year and a half, the number of companies offering buffer ETFs has reportedly tripled.
So prepare for more candy for boomers.
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