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Is NUSI Better Than QYLD? - NUSI ETF Review - YouTube
Channel: Jay Fairbrother
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nusi the nationwide risk-managed income
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etf
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is an etf that targets a high amount of
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current income
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with very little risk it currently has
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an eight percent dividend yield and pays
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out dividends monthly
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so does it deserve a spot in your
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portfolio
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let's find out
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[Music]
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how's it going everybody welcome back to
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the channel my name is jay
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and today we're talking about the
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nationwide risk managed
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income etf ticker symbol n-u-s-i
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we'll go over all the details of the
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nusi etf
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how it works what it holds how it pays
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that eight percent dividend yield how it
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stacks up against qyld which is a very
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similar etf to nusi and finally
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whether or not nusi is worth buying and
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worth investing in for your portfolio
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before we get into all that good stuff i
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just have to ask you to please hit the
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like button down below on this video
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it really helps me the video and the
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channel out
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spreads us around to new people who
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might not otherwise see my beautiful
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face
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so with that out of the way let's get
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right into it what is
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nusi and how does it work
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nusi is an income etf from nationwide
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which most of you may know as just an
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insurance company
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but the name of the etf is the
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nationwide risk
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managed income etf so i guess that whole
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managing risk thing falls right into
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their wheelhouse as an insurance
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provider and usi however has
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nothing to do with insurance products
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whatsoever so don't worry about that
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it does offer a near eight percent
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dividend yield
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and pays out those dividends on a
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monthly basis
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and the overall strategic goal of the
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etf is to
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offer a high amount of current income
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while managing the risk you take on to
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do so and
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if you go to the nusi fund prospectus
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they say
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right off the bat that the constant
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decline in
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interest rates since the 1980s has made
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it increasingly more difficult for
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investors to find reliable streams of
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income
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from traditional bond investing sources
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so they created the nusi etf to kind of
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fill this gap
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of being able to generate income from
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your investments where you
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would traditionally look towards bonds
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but with interest rates being at
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historical lows you're not exactly
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getting from that source anymore
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so how does nationwide plan to
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accomplish this with the nusi
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etf how does it work and what are its
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holdings
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so we can break down how nusi works into
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four steps step number one is they buy
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and hold
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all of the stocks that make up the
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nasdaq 100
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index step number two is they implement
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what they call a protective collar
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strategy
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no not like that protective collar
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strategy is an options trading strategy
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that lets you play both sides of the
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coin in a way on the upside
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you're selling covered calls against the
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stocks you hold to collect
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income and set a limit where you'll sell
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the stocks should the price rise
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and then on the other side you're buying
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a put
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option so if the price of your stocks
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falls you can also
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sell at that price on the bottom end so
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you can kind of think of it like a
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sandwich where you have your stock
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that may be trading at a hundred dollars
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right now so you're selling your covered
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call at maybe a hundred and ten dollars
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per share
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and then you're buying that put at maybe
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ninety dollars per share
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so you're well protected within a range
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whichever direction that stock moves
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and because nusi is selling the call
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options and buying the put options out
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of the money it leaves room for price
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appreciation on the upside
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and still limits your downside by
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locking in that floor amount with the
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put
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step number three in the strategy of
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nusi
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is to collect the premiums from selling
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those call options
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and any dividend payments on those 100
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stocks it holds
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and distribute that back to you and me
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as the investors
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in the form of that monthly dividend and
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finally last but not least
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step four is any leftover premium after
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all that is done
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they take and they reinvest back in
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those nasdaq 100 stocks
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now if you're a regular on my channel
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you may remember a video not so long ago
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where we looked at the qyld etf
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and right now you're probably saying to
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yourself jay
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this sounds a lot like qyld what's the
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difference
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and i'll tell you what the difference is
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qyld is
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also an etf that buys the nasdaq 100
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stocks
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and sells covered calls against that
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index for the income it provides
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the main difference is qyld is selling
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the covered calls
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at the money and what at the money means
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in options terms
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is when you have a stock trading at 100
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and you sell your call option
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the strike price of that option is also
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100
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and usi on the other hand is selling the
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call options
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out of the money so again if we have a
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stock that's trading at 100
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selling an out of the money call option
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may mean we set the strike price at 105
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or 110
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doing this will generate a little less
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income from the options premiums when
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we're selling that contract
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but it leaves us room for price
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appreciation on the range between where
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that stock is today and wherever we
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sell that option the strike price at
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another main difference between
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qyld and nusi so where qyld
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isn't limiting the downside risk
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whatsoever and usi
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is buying that put option and kind of
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setting the floor
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so if our 100 stock drops to 90 we
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sell our shares and collect the income
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right there so that's the main
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difference between
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qyld and nusi qyld is generating
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more income by selling at the money
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options but qyld
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doesn't leave room for capital
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appreciation and it doesn't limit the
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risk on the downside
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should the nasdaq 100 start to tank and
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usi generates a
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small amount less premium but does give
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room for capital appreciation
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and does limit the risk on the bottom
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end now
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how will nusi perform and how will it
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perform
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versus qyld in different market
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scenarios
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and let's start with a rising market a
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bull market now it's important to note
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right off the bat
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that in a rising market all of these
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income etfs we look at will generally
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underperform the broader index so
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nusi qyld are going to lag
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qqq which is the nasdaq 100 index etf
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by a large margin in a rising market in
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a
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slightly rising market a slowly rising
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market
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nusi will perform pretty well it'll be
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collecting
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the premiums from the call options
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contracts and you'll be gaining the
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share price growth in between where the
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index started and wherever it finishes
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at the date of expiration of those
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contracts so in a slowly rising market
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nusi will outperform qyld mainly due to
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the capital appreciation between where
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both etfs
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sell their call options at next let's
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look at a sideways or a stagnant market
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or even a market that drops just a
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little bit in this kind of market
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it's all going to come down to the
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premium being generated
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from those options contracts because the
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market isn't rising and
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hitting those strike prices for the
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options contracts you're not selling off
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your underlying stocks
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so really all these etfs are doing in
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this scenario is collecting those
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premiums and distributing
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back to the investors in this scenario
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qyld is going to outperform nusi
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because qyld is selling those at the
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money options contracts which collect
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a higher initial premium now in a major
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market crash
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nusi is going to outperform qyld
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because remember nusi buys those
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protective puts on the downside
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so there's a floor to how far it can
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fall before those are exercised
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so with qyld if we start at 100 and we
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fall down to 50 you're taking on all of
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that downside risk
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but with nusi if the index starts at 100
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they're buying those puts at for example
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90
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so as the market falls nusi is selling
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and collecting the money at 90
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so if it continues to fall further down
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to 50
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you're not taking on any of that risk
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between ninety dollars
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and fifty dollars or wherever it may end
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up and we can see this in action if we
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take a look at this graph here of the
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two etfs
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qyld versus nusi look at how they
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performed in march of 2020
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when everyone thought the world may be
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ending qyld dropped much farther and
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much harsher than
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nusi did at that point and here we can
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also see
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since its exception it has outperformed
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qyld
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by about 11 including dividends the next
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thing we always want to look at with any
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mutual funds or etfs is what's the
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expense ratio like
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nusi has an expense ratio of 0.68
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percent
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this is slightly higher than qyld which
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is 0.6 percent
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but it's still lower than most actively
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managed funds if you look at a lot of
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the arc
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funds there at 0.75 so
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how would you use nusi in your portfolio
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lucky for us the fine people over at
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nationwide give us this handy chart
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right in the nusi marketing materials
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to suggest how they think you should use
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the etf in your strategy
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number one a complement to the
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traditional 60 40 portfolio allocation
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which is 60 socks 40 bonds number two
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they say you can use it as a bond
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alternative to provide greater
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flexibility across market cycles
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use number three they give they suggest
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you can use it as a way to
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damper volatility within your existing
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portfolio allocation
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and last but certainly not least as a
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tool to provide
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current income from your investments
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with which those monthly dividend
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payouts and that eight percent dividend
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yield
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i think is going to be the main draw to
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the etf for a lot of people and as you
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look over those four points in that list
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a lot of those things are what bonds
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were traditionally used for over the
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years
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but like we saw at the beginning they
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created this etf
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as kind of a replacement for bonds
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because
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interest rates are so low over the past
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20 30 plus years that you just can't
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generate the kind of income a lot of
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people are looking for from bonds alone
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anymore
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let me know what you think of nusi etf
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if you're intrigued by it all or if
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you're already investing in it leave me
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a comment let me know how it's working
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out for you check out these two videos
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right over here if you're looking for
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other investment ideas or other videos
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that'll help you become a better
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investor and better with your money
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thank you as always for taking the time
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to watch this video
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i hope you enjoyed it and i'll see you
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in the next one
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