By combining actively managed equity portfolios with an options overlay, Equity High Income Strategies have the potential to serve three crucial roles in portfolios.
Watch the 1-minute video to find out how.
Amid volatile markets, investors may tap into Equity High Income Strategies to:
1. Seek income: On top of stock dividends, these strategies may generate additional income in the form of option premiums by selling call options1. This may help enhance the cashflow cushion in portfolios. Furthermore, income from option premiums may increase during periods of high market volatility, potentially buffering portfolios from price swings at a time when investors may need it most.
2. Navigate volatility: A diversified portfolio across companies, sectors, and markets may help smooth investment returns, while active management helps keep the underlying equity portfolios responsive to changing markets. Income from stock dividends and option premiums may also help partially offset any price declines. Put together, a lower volatility approach to equity investing may help investors maintain their market exposure even in difficult conditions.
3. Diversify beyond fixed income: Equity High Income is less directly exposed to interest rate risks and credit risks – factors that tend to be more associated with fixed income. As such, these strategies may help diversify income streams beyond traditional income-yielding assets like bonds.
The three roles that Equity High Income Strategies can play in portfolios highlight their usefulness as potential solutions that can help investors maintain strategic equity exposure even in challenging market conditions.