Buffer ETFs™: Downside Protection for Market Uncertainty

With the approach of a contentious election season in the United States, marked by heightened political polarization and economic uncertainty, investors are naturally seeking safer havens for their portfolios. Add to this the opacity surrounding the future of interest rates, and the traditional investment landscape appears fraught with challenges. In such an environment, many investors are exploring strategies to preserve capital while still allowing for potential market growth. Enter the 100% Buffer ETF™ — a potential solution that may serve as a timely investment tool for navigating the path that lies ahead.

What Are 100% Buffer ETFs™? 

Buffer ETFs™, part of the broader category known as Defined Outcome ETFs™, are designed to provide a level of downside protection while offering defined upside participation. A 100% Buffer ETF™ takes this concept to its maximum potential, allowing investors to shield themselves from 100% of market losses over a defined period. In exchange for this sought-after protection, the ETF will have a capped level of upside potential during that same period.

Innovator launched three new 100% Buffer ETFs™ on October 1st, providing investors fresh opportunities to lock in defined upside potential with built-in 100% downside protection. 

The Current Economic and Political Landscape

Despite resilience in consumer spending and labor markets, there are growing concerns over the future of economic growth, particularly as inflation remains persistently above average.  

On top of this economic uncertainty, the upcoming election adds another layer of unpredictability. Elections often push market volatility higher, and the 2024 election is shaping up to be one of the most contentious in modern history.  

In this context, risk management becomes essential. This is where 100% Buffer ETFs™ come into play. 
 

Why Now Is the Time for 100% Buffer ETFs™

Buffer ETFs™ offer downside protection against potential volatility from the upcoming election as well as bond market uncertainty, providing investors peace of mind. 

Volatility from the Upcoming Election

Contentious elections can bring about heightened market volatility. As history has shown, the stock market tends to experience increased swings during election cycles, particularly in the months surrounding the event. In 2024, the stakes are as high as ever, with significant policy differences between the major parties.

In times like these, many investors may seek more predictable, lower-risk investments. A 100% Buffer ETF™ offers a balanced approach: remain invested in the market while seeking to protect against major losses if volatility spikes unexpectedly. 

Interest Rate Sensitivity and Traditional Bonds

Traditionally, bonds have been a go-to asset class for those seeking safety in times of market volatility. As interest rates fall, however, the value of existing bonds will rise, making them more expensive to purchase. Additionally, a lower-yield environment may not provide sufficient income to compensate for the risk of inflation or unexpected downturns in the bond market.

Buffer ETFs™ offer a compelling, tax-efficient alternative to bonds in this scenario. While bonds may offer taxable income, their prices can decline and their issuers can default, creating a much different risk management profile from that offered by 100% Buffer ETFs™.  Investors can diversify their diversifiers with 100% Buffer ETFs™, using them to manage the risk of equities, without adding the interest-rate or credit risk of bonds. 

Investor Psychology: Peace of Mind

Investing is not just a numbers game; it’s also psychological. Fear of loss often drives poor decision-making, such as panic selling or sitting on the sidelines during periods of volatility.

A 100% Buffer ETF™ can alleviate much of this psychological pressure. By knowing their principal investment is protected, investors can remain disciplined in their long-term strategy without worrying about making knee-jerk reactions to market headlines.  

Conclusion: An Intuitive Move for Today’s Market

In a market where the election cycle looms large and the interest-rate horizon is blurred, a 100% Buffer ETF™ may provide a timely solution for risk-averse investors who still want exposure to equity markets. The downside protection offered by these ETFs can ease fears of sudden market corrections, while the potential for defined upside participation ensures that investors don’t miss out on gains in a rising market.

Allocating to 100% Buffer ETFs™ offers the rare and valuable combination of peace of mind and growth potential that can be difficult to come by. As political and economic uncertainties increase, now may be an ideal time for investors to consider the benefits of 100% Buffer ETFs™ as a key component of their portfolio strategy.  

* Caps and buffers are stated gross of fees and expenses.

The Fund has characteristics unlike many other traditional investment products and may not be suitable for all investors. For more information regarding whether an investment in the Fund is right for you, please see "Investor Suitability" in the prospectus.

The Funds face numerous market trading risks, including active markets risk, authorized participation concentration risk, buffered loss risk, cap change risk, capped upside return risk, correlation risk, liquidity risk, management risk, market maker risk, market risk, non-diversification risk, operation risk, options risk, trading issues risk, upside participation risk and valuation risk. For a detailed list of fund risks see the prospectus.

There is no guarantee the Fund will be successful in providing the sought-after protection. If the Outcome Period has begun and the Underlying ETF has increased in value, any appreciation of the Fund by virtue of increases in the Underlying ETF since the commencement of the Outcome Period will not be protected by the Buffer, and an investor could experience losses until the Underlying ETF returns to the original price at the commencement of the Outcome Period.

Fund shareholders are subject to an upside return cap (the "Cap") that represents the maximum percentage return an investor can achieve from an investment in the funds' for the Outcome Period, before fees and expenses. If the Outcome Period has begun and the Fund has increased in value to a level near to the Cap, an investor purchasing at that price has little or no ability to achieve gains but remains vulnerable to downside risks. Additionally, the Cap may rise or fall from one Outcome Period to the next. The Cap, and the Fund's position relative to it, should be considered before investing in the Fund. The Fund's website, www.innovatoretfs.com, provides important Fund information as well information relating to the potential outcomes of an investment in a Fund on a daily basis.

The funds seek 100% downside protection, before fees and expenses. There is no guarantee the funds will achieve their investment objectives. The Funds have characteristics unlike many other traditional investment products and may not be suitable for all investors. For more information regarding whether an investment in the Funds is right for you, please see "Investor Suitability" in the prospectus.

These Funds are designed to provide point-to-point exposure to the price return of the Reference Asset via a basket of Flex Options. As a result, the ETFs are not expected to move directly in line with the Reference Asset during the interim period.

Investors purchasing shares after an outcome period has begun may experience very different results than fund's investment objective. The Fund will not terminate after the conclusion of the Outcome Period. After the conclusion of the Outcome Period, another will begin.

FLEX Options Risk The Fund will utilize FLEX Options issued and guaranteed for settlement by the Options Clearing Corporation (OCC). In the unlikely event that the OCC becomes insolvent or is otherwise unable to meet its settlement obligations, the Fund could suffer significant losses. Additionally, FLEX Options may be less liquid than standard options. In a less liquid market for the FLEX Options, the Fund may have difficulty closing out certain FLEX Options positions at desired times and prices. The values of FLEX Options do not increase or decrease at the same rate as the reference asset and may vary due to factors other than the price of reference asset.

Investing involves risk. Principal loss is possible. All rights reserved. Innovator ETFs are distributed by Foreside Fund Services, LLC.

The Fund's investment objectives, risks, charges and expenses should be considered carefully before investing. The prospectus and summary prospectus contain this and other important information, and it may be obtained at innovatoretfs.com. Read it carefully before investing.

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