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WHAT IS A DEFINED OUTCOME ETF?
Defined outcome ETFs provide several pre-determined parameters that result in a defined return outcome based on the performance of the underlying index. The image to the left includes an example of these parameters. Using ETFs allows for transparent and efficient asset allocation. Defined Outcome ETFs do not mature. Instead, they are reset annually with new terms based on market conditions at the time. ETFs also allow for greater liquidity and are actively traded on an exchange. Lastly, ETF based defined outcome strategies are not subject to issuer credit risk.
Defined Outcome ETFs offer protection buffers and maximum upside cap levels from the underlying index initial value to the reset period (typically reset annually). The example to the right provides a hypothetical scenario of returns based upon different index price returns over that timeframe. In the interim period, remaining cap and buffer levels may change based upon the underlying index performance. At the end of the timeframe, ETFs are reset with new pre-defined buffers and caps based on current market conditions.
WHY USE A DEFINED OUTCOME PORTFOLIO?
A traditional asset allocation approach uses a combination of stocks and bonds to achieve growth through the stock allocation and risk mitigation through the bond allocation. The Defined Outcome Series operates differently:
Historically, the use of bonds as a tool for risk mitigation has been a viable strategy. In rising interest rate environments, however, bonds may not provide the level of protection and income that investors have historically relied upon. While bonds are typically less volatile than stocks, the risks of investing in bonds include:
While stocks have their own set of risks, pre-defined outcomes can provide investors with a well-defined understanding of their risks and the potential for upside. Investors should consider the ramifications of significant declines in their portfolios and not all investors have the luxury of multiple decades of investment in the stock market. The FlagshipBuffered Outcomes ETF Portfolio provides various levels of protection to buffer against losses, while not having to sacrifice the potential for growth. These risks include loss as a result of the index used falling below the pre-determined buffered levels of protection.
THE FLAGSHIP BUFFERED OUTCOMES ETF PORTFOLIO PROCESS
The Flagship Portfolio Management team will actively manage individual buffered ETFs within the portfolio. The selection process will be opportunistic when selecting indices, the level of protection and relative value based upon market outlooks. Examples of active decisions made by the team include:
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Flagship Financial Advisors) any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Moreover.you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Flagship Financial Advisors. No amount of prior experience or success should not be construed that a certain level of results or satisfaction if Flagship Financial Advisors is engaged, or continues to be engaged, to provide investment advisory services. Flagship Financial Advisors is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the Flagship Financial Advisors current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.flagshipfinancialtn.com.