Volatility is a natural part of investing, but it can be destructive to your portfolio. Although it is always wise to have strategies that can help reduce volatility, it may be especially important when changes in market or economic conditions seem inevitable. The right volatility strategy may, in fact, not only help reduce volatility, but also potentially enhance returns.
WisdomTree has a number of options to help investors reduce volatility—and potentially enhance returns— in any market conditions.
WisdomTree CBOE S&P 500 PutWrite Strategy Fund
The WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW) gives investors the option to reduce volatility, while potentially enhancing their returns in one simple investment that can complement their existing holdings.
Put writing has been used by professional investors for decades to increase the yield and lower the volatility of equity returns over various market cycles. PUTW invests in one- and three-month Treasury Bills, and sells or “writes” S&P 500 Index put options (enough to ensure full collateralization).
PUTW provides investors:
- Potential to earn additional income from premiums generated by selling put options
- Potential for enhanced risk-adjusted returns compared to S&P 500 Index or a similar covered call strategy
- Ability to benefit from implied volatility typically being higher than realized volatility
How to Manage Volatility
By Tripp Zimmerman
Part of being a successful investor is finding a way to balance and manage the amount of volatility you have in your portfolio.
WisdomTree 90/60 U.S. Balanced Fund
The WisdomTree 90/60 U.S. Balanced Fund (NTSX) was designed to help investors create more optimal portfolios and help magnify portfolio exposures through the prudent use of leverage. While NTSX does not borrow to gain additional exposure, it does use futures contracts to enhance the capital efficiency of the Fund. As markets remain volatile, we believe that combination of large-cap U.S. equities plus an overlay of Treasury futures can provide the diversification benefits of a 60 equity/40 bonds portfolio with the upside potential of 100% equities. After one of the most violent equity selloffs in history, NTSX has been able to significantly reduce drawdowns while still participating in equity market upside.
- Maintain exposure to equity markets while limiting drawdowns via U.S. Treasury futures
- Potentially enhance risk-adjusted returns of large-cap U.S. equity exposure
- Use to help boost capital efficiency in asset allocation allowing for increased exposure to non-core / diversifying investments