ETFs that limit losses in an investment portfolio: are they for real? Apr 6th

The “Big Five” Canadian banks offer investment funds and include Royal Bank of Canada, Toronto Dominion Bank (TD Canada Trust), Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce (CIBC). Let’s explore the best place for you to invest.
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Q. We would like to find a product that will offer good, solid downside protection. I purchased the Invesco S&P 500 Downside Hedged ETF (PHDG), but I’m not sure if just leaving it in our portfolio is a good idea. We have a small account and never use stop losses, so we need a good product.
— Rena
A. “Downside protection” sounds like a wonderful thing. Investors embrace risk during periods of strong returns in equities, but they run away from it when the stock market turns volatile. Finding a strategy or fund that captures most of the upside while significantly limiting losses is obviously appealing. Unfortunately, Rena, it’s fantasy.
Not that there’s any lack of advisors or products making that promise. The ETF you are using, the Invesco S&P 500 Downside Hedged ETF (PHDG), is one of these. The fund’s literature says it “seeks to achieve positive total returns in rising or falling markets,” and who wouldn’t be happy with that? The ETF’s strategy is to buy some combination of the stocks in the S&P 500 Index and futures contracts tied to the CBOE Volatility Index, nicknamed the VIX…

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