Cory, One would need to do the analysis to be certain, but my expectation is that defined-outcome ETFs suffer from the same disadvantage (relative to a 60/40) on an after-tax basis as on a pre-tax basis. The fact that they carry roughly 200 basis points in effective expenses (their expense ratio plus the loss of dividends) is too big a hurdle to overcome.
Good post! Do we have a sense of how much of the money invested in the buffer ETFs in your study was there at the designated start date vs came later? Asking because I could imagine there’s potentially a lot of variability of outcomes depending on when investors get in, whether they hold to the end, etc.
Perfect. Thankyou Bob. The industry really needed this expert take. Defined outcome has its place, but not with investors. Perhaps if someone scored a 1 on a 1 - 10 risk management scale, in other words, a saver, 10% of their assets could go in. But for the long-term average investor there is too much embedded drag to justify them. They are more bond beta than stock beta, but I really needed to see your data to confirm this.
Cory, One would need to do the analysis to be certain, but my expectation is that defined-outcome ETFs suffer from the same disadvantage (relative to a 60/40) on an after-tax basis as on a pre-tax basis. The fact that they carry roughly 200 basis points in effective expenses (their expense ratio plus the loss of dividends) is too big a hurdle to overcome.
Thanks, Jeffrey. I will request the data and post what I find out.
Good post! Do we have a sense of how much of the money invested in the buffer ETFs in your study was there at the designated start date vs came later? Asking because I could imagine there’s potentially a lot of variability of outcomes depending on when investors get in, whether they hold to the end, etc.
Is it worth extending the analysis to an after-tax basis?
Perfect. Thankyou Bob. The industry really needed this expert take. Defined outcome has its place, but not with investors. Perhaps if someone scored a 1 on a 1 - 10 risk management scale, in other words, a saver, 10% of their assets could go in. But for the long-term average investor there is too much embedded drag to justify them. They are more bond beta than stock beta, but I really needed to see your data to confirm this.
Thank you, Andy. I am happy to share the data if you are interested. Let me know.
Very much interested Bob. Thankyou!