A strong earnings season from many mega-cap technology companies appears to be yet another feather in the cap for the tech sector this year. Advisors looking to capture the returns in tech while keeping an eye towards tax-efficient distributions would do well to consider the Nationwide Nasdaq-100® Risk-Managed Income ETF (NUSI).
Thus far this year, the Nasdaq-100® Index, which consists of 100 of the largest non-finance securities traded on the Nasdaq exchange, continues to outperform broad equities.
Given the technology-heavy Index’s strong performance this year, advisors and investors need to consider the potential tax implications of their current exposures.
Come tax season, income is taxed in various ways, including ordinary income, capital gains, and tax-advantaged. Long-term capital gains are generally taxed more favorably at lower tax rates than ordinary income. Tax-advantaged distributions can include assets exempt from federal and/or state taxes and Return of Capital. RoC distributions generally are not taxable in the same year they are paid out, providing greater flexibility for clients.
Tax-Efficient Tech Investing With NUSI
NUSI is an actively managed fund that follows a proprietary, systematic, rules-based options trading model. It seeks to generate high current monthly income and utilizes a replication strategy to invest in stocks included in the Nasdaq-100® Index. The Nasdaq-100® Index consists of 100 of the largest non-finance securities traded on the Nasdaq exchange. The Index follows a rules-based, market-capitalization-weighted strategy.
For those advisors seeking more tax-efficient exposure to the Nasdaq-100 Index, NUSI is a fund to consider. A portion of distributions from NUSI are classified as Return of Capital.
NUSI utilizes a collar strategy to seek to provide monthly income. The strategy also seeks to reduce volatility and offer a measure of downside protection. A collar strategy entails holding shares of underlying securities. At the same time, the strategy buys protective put options and writes calls for the same security.
A put option gives its owner the right but not the obligation to sell the underlying asset at a strike price on a set day until the expiration of the call. In contrast, a call option gives its owner the right but not the obligation to buy the asset at the strike price until expiration.
The options collar intends to reduce the Fund’s volatility and provide a measure of downside protection. It also seeks to hedge via the protective puts while generating income from the premiums earned from selling covered calls. Options that the Fund buys and sells generally expire one month from when purchased or sold. Options also roll the day before expiration on the third Friday of each month.
NUSI has an expense ratio of 0.68%.
For more news, information, and strategy, visit the Retirement Income Channel.
This article was prepared as part of Nationwide’s paid sponsorship of ETF Trends.
ETFs, hedge funds, equities, bonds, and other asset classes have different risk profiles, which should be considered when investing. All investments contain risk and may lose value. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV, and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund’s return may not match or achieve a high degree of correlation with the return of the underlying Index.
Click here for Fund Details, including the top 10 holdings – https://nationwidefinancial.com/products/investments/etfs/fund-details/NUSI
The NUSI Prospectus may be accessed at: https://nationwidefunds.onlineprospectus.net/nationwidefunds/NUSI/index.html
Call 800-617-0004 to request a summary prospectus and/or a prospectus, or download prospectuses at etf.nationwidefinancial.com. These prospectuses outline investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing.
The results shown represent past performance; past performance does not guarantee future results. Current performance may be lower or higher than the past performance shown, which does not guarantee future results. Share price, principal value and return will vary, and you may have a gain or a loss when you sell your shares. Returns for periods less than one year are not annualized. Short-term performance, in particular, is not a good indication of the Fund’s future performance, and an investment should not be made based solely on returns. To obtain the most recent month-end performance, go to etf.nationwidefinancial.com or call 1-877-893-1830.
Click this link for the funds’ Standardized performance and 30-day SEC yield.
KEY RISKS: The Fund is subject to the risks of investing in equity securities, including tracking stock (a class of common stock that “tracks” the performance of a unit or division within a larger company). A tracking stock’s value may decline even if the larger company’s stock increases in value. The Fund is subject to the risks of investing in foreign securities (currency fluctuations, political risks, differences in accounting and limited availability of information, all of which are magnified in emerging markets). The Fund may invest in more-aggressive investments such as derivatives (which create investment leverage and illiquidity and are highly volatile). The Fund employs a collared options strategy (using call and put options is speculative and can lead to losses because of adverse movements in the price or value of the reference asset). The success of the Fund’s investment strategy may depend on the effectiveness of the subadviser’s quantitative tools for screening securities and on data provided by third parties.
The Fund expects to invest a portion of its assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Fund may not be invested fully in the securities of the Index or may hold securities not included in the Index. The Fund frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Fund and greater tax liabilities for shareholders. The Fund may concentrate on specific sectors or industries, subjecting it to greater volatility than that of other ETFs. The Fund may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Fund’s value and total return. Although the Fund intends to invest in a variety of securities and instruments, the Fund will be considered nondiversified. Additional Fund risk includes: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.
S&P 500® Total Return Index: An unmanaged, market capitalization-weighted index of 500 stocks of leading large-cap U.S. companies in leading industries; it gives a broad look at the U.S. equities market and those companies’ stock price and dividend performance.
S&P Indexes are trademarks of Standard & Poor’s and have been licensed for use by Nationwide Fund Advisors LLC. The Products are not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s does not make any representation regarding the advisability of investing in the Product.
Nasdaq-100® Index: A rules-based, market capitalization-weighted index of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange. The Index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.
Nasdaq® and the Nasdaq-100® are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use by Nationwide Fund Advisors. The Nationwide Nasdaq-100® Risk-Managed Income ETF (“NUSI”) has not been passed on by the Corporations as to their legality or suitability. NUSI is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT.
Nationwide Fund Advisors (NFA) is the registered investment advisor to Nationwide ETFs, which are distributed by Quasar Distributors LLC. NFA is not affiliated with any distributor, subadviser, or index provider contracted by NFA for the Nationwide ETFs. Representatives of the Nationwide ETF Sales Desk are registered with Nationwide Investment Services Corporation, member FINRA, Columbus, Ohio.
Nationwide, the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. © 2023 Nationwide.
MFM-5270AO, NFA-429610-2023-09-26
newETFs.io respects the hard work of others and gives all credit to the remarkable folks at ETFTrends.com. This excerpt/article was pulled from their RSS feed; click here to view the original. Please note that on occasion, the RSS feed will not have the author. When this happens this site defaults the author to "News". Make no mistake, this excerpt/article was not created by newETFs.io, it was simply shared with you.
