Investors approaching retirement are increasingly seeking stable income products that can provide consistent returns while also growing their assets over the long term. As the market landscape becomes more uncertain, the demand for income-focused investments has grown significantly. This article explores the reasons behind this trend and highlights the benefits of actively managed strategies in achieving stable income.
According to Strategas managing director Todd Sohn, the word “income” has gained prominence in the investment world, reflecting the significant amount of capital flowing into income products. Many investors who are nearing retirement view stable income as crucial for paying off their monthly bills and maintaining financial stability. This shift is driven by a growing cohort of individuals who want to preserve their wealth while still receiving a regular paycheck.
The narrow market leadership witnessed this year has contributed to the increased appetite for income products. With only a handful of stocks driving a significant portion of the S&P 500’s performance, there is a concern among some investors that the market’s gains may not be sustained. To mitigate this risk, experts suggest active management as a way to navigate potential market downturns and capitalize on opportunities.
Goldman Sachs Asset Management’s managing director of exchange-traded funds, Brendan McCarthy, believes that active ETFs with an options overlay strategy can help investors achieve stable returns. By using derivative-type products, these strategies generate income while providing robust solutions. McCarthy manages Goldman Sachs’ new active funds, namely the Goldman Sachs S&P 500 Core Premium Income ETF (GPIX) and Goldman Sachs Nasdaq-100 Core Premium Income ETF (GPIQ). These ETFs employ an options overwrite strategy to generate additional income beyond the broader indices’ returns.
The performance of GPIX and GPIQ since their launch on October 26 depicts their potential for generating stable income. GPIX has gained 9.46%, while GPIQ is up 10.74%, surpassing the returns of the underlying S&P 500 and Nasdaq 100 indexes, which stand at 9.97% and 11.84% respectively during the same period. This highlights the effectiveness of actively managed strategies in outperforming the broader market.
As investors approach retirement, their focus shifts towards generating stable income to meet their financial needs. The recent market conditions, characterized by narrow market leadership, make income products an attractive choice for those seeking consistent returns. While passive investing has its merits, actively managed strategies, such as those involving options overlay, offer a proactive approach to generating income and potentially outperforming the overall market. Investors must carefully assess their risk tolerance and financial goals to determine the most suitable income product for their retirement portfolio. And with the rise of stable income products, investors now have more options than ever to secure their financial future.