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The Benefits of Defined Outcomes In A Rising Rate Environment

The Benefits of Defined Outcomes In A Rising Rate Environment

DThese efined results are not new. They have been available through bank offerings and insurances. But Innovator ETFs has included them within their ETF suite to provide investors and advisors with opportunities to harness their potential in their portfolios. You can find out more about Innovator ETFs here. Recent webcastModerator: Tom Lydon CEO of ETF Trends. Bruce Bond, co-founder and CEO of Innovator ETFs, and Graham Day Vice President of product research, discussed the potential advantages of having defined outcomes for a portfolio that is growing in rate.

Bond explains that Innovator ETFs had its strongest quarter in 2022’s first quarter, bringing in nearly $1 billion in flows. This highlights the potential for funds to do well in times when rates are rising.

You need to rethink the 60/40 rule. Advisors are looking for places where they can put the bond money to use, but where should they look? Day asks. Day asks, “Do you avoid hedged equities? Or do you prefer commodities?” They may be peaking and so we are having our discussions about how to include these buffer ETFs in clients’ portfolios.

Day believes that buffered ETFs are simple because they are transparent about what they own. The Innovator ETFs offer upside and downside potential to the S&P 500 over a period of one year.

Day claims that it is evident that equities outperform bonds when the Fed raises rates. While bonds used to receive tailwinds from higher yields in the past, lower yields now represent a headwind.

Previous Fed rate hike cycles that saw inflation close to current levels have always resulted in a recession. This makes it difficult to invest in stocks. Innovator’s defined outcomes buffer ETFs have clear caps on equity performance. They have been recently increased to allow investors and advisors to see exactly what they have as well as the percentage of protection against loss.

This product is a great option if you want to avoid bonds and still have some growth in your portfolio. However, it does not carry all the risks of the equity market. Bond says.

Investing In Defined Outcome ETFs

Bond recommends that you invest in the ETFs for the entire year. However, advisors can enter or exit the fund at any time during the year. The Innovator website offers tools to help them calculate the potential outcomes. U.S. large-cap and small-cap ETFs are available for investment.

A 15% buffer would be helpful if you believe the market will drop 20%. The good news is that the market will drop 20% in the first six months. Day states that while the 15% buffer will not be fully realized until the one year outcome period, Day believes that volatility would be significantly reduced during that timeframe.

ETFs that have a defined outcome offer easy access, liquidity and transparency. They have defined return parameters and risk parameters. They are tax-efficient and don’t carry credit risk.

Innovator does not have any other products. We only have one ETF that is doing it. Bond says this is the concept that we have introduced. It is the one that we consider the specialist in.

The ETFs discussed include: Innovator U.S. Equity Power Bulffer ETF- March (PMAR).,Innovator Defined wealth Shield ETF (BALT).,The Innovator U.S. growth Accelerated Plus ETF-April (QTAP)..

Financial advisors who are interested can learn more about defined outcomes investing. Watch the webcast here on Demand.

Learn more at

The views and opinions expressed in this article are those of the author and not necessarily those of Nasdaq, Inc.

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