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Reducing Volatility Without Sacrificing Return
Who knows what the market is going to do. It’s an election year in the U.S., every summer breaks a new heat record, foreign conflicts are escalating, and interest rates are steady — for now. It’s already difficult to infer how the market might respond to known factors, but unpredictable events can have even more drastic impacts on the market.
In the stock market, volatility1 refers to how greatly an asset’s price deviates from the average. The CBOE Volatility Index (VIX)2 quantifies expected volatility of the market and has had an all-time average of 21. A VIX value over 20 indicates higher than normal expected volatility. And while volatility is a natural characteristic of the market, there are modern strategies to reduce volatility in an investor’s portfolio.
Many ETFs that aim to reduce volatility typically come in the form of a defined outcome ETF, whereby a buffer is put in place against both losses and gains. TrueShares, however, offers a unique volatility-reduction tool with an uncapped buffered ETF that only puts a buffer in place against the losses, aiming to protect against the first 10% over a 12-month period. This uncapped structured outcome ETF is exactly what it sounds like — zero cap on gains with a buffer against losses.
The ETFs that place caps on gains in order to also protect against losses miss out on big upsides that occur more often than one might think. During the 30-year period between 1993 and 2023, the S&P 500 Index3 returned over 17% nearly one-third of the time. Meanwhile, losses under -9% only occurred 15% of the time, or roughly half as often as big gains. And when markets do fall, many investors tend to pull out of the market in a panic. An uncapped buffer ETF encourages investors to stay in the market through downturns by protecting that first 10%. Staying invested allows investors to gain the most from the rebound, which is even more true for an uncapped ETF that allows investors to take full advantage.
Instead of worrying about what the market might do or trying to navigate the inevitable volatility alone, investors can invest in an uncapped buffer ETF that does all the leg work. Not only does it have the potential to reduce losses, capitalize on gains, and reduce volatility, but it does so all in one accessible, easy ETF package. In the ETF package, TrueShares Structured Outcome ETFs seek to provide daily liquidity, portfolio transparency, cost efficiency, and tax efficiency. Structured Outcome ETFs aim to be the best of both worlds: reduced loss and volatility with full gain potential.
- https://www.investopedia.com/terms/v/volatility.asp
- https://www.investopedia.com/terms/v/vix.asp
- The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.
The Funds have characteristics unlike many other traditional investment products and may not be suitable for all investors.
The Funds are designed to seek to achieve the investment strategy for investments made on the Initial Investment Day and held until the last day of the Investment Period. Investors purchasing shares in the fund after its investment period has begun or selling share prior to the end of the investment period, may experience very different results than the fund’s stated investment objective.
Investors may experience losses beyond the targeted buffer levels. The Fund does not provide principal protection and an investor may experience significant losses on its investment, including the loss of its entire investment.
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