Invesco Explores New Income Portfolio Strategies to Enhance Investor Returns

Imagine riding a roller coaster that goes up and down without warning. That’s what the stock market can feel like when things get bumpy—and lately, it’s been a wild ride. So, how do you keep your money safe and growing when the market is unpredictable? Let’s break it down in simple terms.

Why This Matters for Investors

When markets swing up and down, it can make investors nervous. One way to handle the ups and downs is with special funds that use options—think of them like safety nets for your investments. These funds can help protect your money and even earn you extra income, no matter what interest rates are doing.

What’s Happening Now?

The CBOE Volatility Index—also called Wall Street’s “fear gauge”—just had its wildest week since April. This means a lot of investors are worried about sudden changes in the market.

John Burrello, a senior portfolio manager at Invesco, says income funds that use options are a smart way to handle this. These funds have built-in protections, kind of like having a helmet when biking down a steep hill.

• Options-based funds don’t depend on how stocks and bonds move together.
• They can give steady income that isn’t tied to interest rates.

This is important because experts expect the Federal Reserve to cut interest rates soon. When rates go down, it can be harder to get good returns from regular savings or bonds. But options-based funds don’t have this problem.

Bull Case: Why Investors Like Options-Based Income Funds

• Steady Income: These funds can pay out money regularly, even when rates are low.
• Protection from Drops: Options can help limit big losses if the market falls.
• Diversification: They add a new layer to your portfolio, so you’re not putting all your eggs in one basket.
• Recent Performance: For example, the Invesco MSCI EAFE Income Advantage ETF is up about 14% this year, and the QQQ Income Advantage ETF is up 6%.

According to a 2023 study by Morningstar, funds using options strategies have grown by over 30% in assets since 2021, showing that more investors are looking for ways to earn steady income and reduce risk.

Bear Case: What to Watch Out For

• Too Many Choices: Lots of new funds are popping up, and not all are created equal.
• High Fees: Some funds charge a lot for their services, which can eat into your profits.
• Unsustainable Yields: If a fund promises very high payouts, be careful. It might not last, or it could come with extra risk.
• Flat Performance: Not all funds win—Invesco’s S&P 500 Equal Weight Income Advantage ETF is flat so far this year.

Remember, even with options, you can still lose money if the market takes a big hit. It’s important to understand what you’re investing in and not just chase high returns.

What Should Investors Do?

Burrello’s advice is simple: Look for funds managed by professionals who know how to use options the right way. Don’t get tricked by big promises or super-high payouts that seem too good to be true.

Options-based income strategies have been around for a long time. Just like people always need umbrellas when it rains, many investors need ways to add income and protect against losses—no matter what the weather is like in the market.

Investor Takeaway

• Consider adding options-based income funds to help smooth out the bumps in your portfolio, especially when markets are jumpy.
• Stick with funds managed by experienced professionals—don’t just pick the one with the highest yield.
• Watch out for high fees and promises that sound too good to be true.
• Diversify your investments so you’re not relying on just one strategy.
• Keep learning: Check out trusted sources like Investopedia’s guide to options strategies before making big moves.

For the full original report, see CNBC