Introduced in 2017, buffered ETFs have grown to $78 billion in AUM, with a strong and still-growing preference among risk-averse investors. These ETFs help investors participate in market gains while limiting losses to a predetermined cap, usually around 10–15%. In return, investors give up some upside in exchange for that downside protection. | Buffered ETFs don't just perform well during volatility—they thrive on it. And 2026 could prove to be a defining year for buffered ETFs, as investors seek safety amid concerns about stretched valuations in equity sectors such as AI stocks and rising market volatility. |
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| | | | | What No One's Saying About Amazon's 30k Layoff | | First they cut jobs at Meta... now 30,000 at Amazon—its largest layoff in history. What's happening inside these Mag 7 companies, particularly as the stocks continue to soar to all-time highs? | The same former hedge fund manager who predicted the dot com crash, the housing crisis and the fall of Lehman is now stepping forward to explain what's really going on... and what you should be doing with your money. | |
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| | The Mechanics | Buffered ETFs don't own stocks; they use options strategies. They sell call options (giving up big gains) to pay for put options (protection against losses). When volatility spikes, options become expensive. The fund sells those expensive calls and uses the income to buy stronger protection. When markets are calm, options are cheap. The buffer weakens, or the upside cap shrinks. | Think of it like insurance. When hurricanes are frequent, insurance premiums rise. Buffered ETFs are selling expensive insurance (call options) during volatile periods and using that premium to buy protection (put options) for investors. The more volatile the market, the better the economics of this trade. |
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| | 2025 Set the Stage | The year 2025 set the stage for buffered ETFs, with tariff wars setting the tone for the market. The end of 2025 saw more than a 25–35% average daily trading volume increase compared to 2024. | Top 5 Buffered ETFs – 2025 vs. 2024 Comparison | ETF Ticker | Name | 2025 Net Inflows (Est.) | 2024 Net Inflows | 2025 AUM Growth |
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BUFR | FT Vest Laddered Buffer | ~$1.43B | ~$800M | High: Ended 2025 at ~$8.4B | PJAN | Innovator Power Buffer | ~$600M | ~$450M | Moderate: High renewal interest in Jan 2025 | FDEC | FT Vest U.S. Equity | ~$520M | ~$380M | Stable: Strong Q4 2025 capture | BUFQ | FT Vest Laddered Nasdaq | ~$480M | ~$310M | Strong: Benefited from the 2025 tech rally | PSEP | Innovator Power Buffer | ~$410M | ~$290M | Consistent: Reliable "buffer" inflows during mid-year volatility |
| After the S&P 500 gained over 18% in 2025, many investors felt valuations were stretched, especially in AI and tech stocks. More financial advisors integrated these buffered ETFs into portfolios in 2025, moving them from niche products to core defensive holdings. | Last 5-Year Historical Return vs Volatility | Stock | Historical Volatility | Historical Return |
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SPY | 14.92% | 15.20% | BUFR | 9.28% | 10.18% | PJAN | 7.76% | 9.33% | FDEC | 10.06% | 11.28% | BUFQ* | 11.53% | 15.77% | PSEP | 7.63% | 9.63% |
| *BUFQ – Since June 2022 | The appeal becomes much clearer when comparing historical returns and volatility. Buffered ETFs managed to deliver equity-like returns with significantly lower volatility, something highly valued by risk-averse investors. Despite underperforming the S&P 500 in strong bull markets, they provide smoother rides with fewer dramatic swings. |
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| | Key Trends | Active ETF Momentum: Buffered ETFs fall under the "active" umbrella, which captured a record 32% of all ETF inflows in 2025, despite making up only 11% of total market AUM. The "Triple Crown" Year: 2025 was rare—high flows and new launches coincided with high trading volume, a phenomenon usually seen only during extreme market nervousness. Retail Surge: Retail investor participation grew by an estimated 15–20% year-over-year, as "normal" investors sought protection after 2025's massive gains. Institutional Adoption: More financial advisors integrated buffered strategies into model portfolios, elevating these funds from niche products to core defensive holdings.
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| | 2026 – The Perfect Setup for Buffered ETFs | Buffered ETFs could grow to over $100 billion by the end of 2026 if nervous investors remain concerned about stretched valuations and uncertain macro conditions. Buffered ETFs need volatility. | Here's what to watch for: | Financial advisors moving buffered ETFs to the center of portfolios rather than using them as short-term hedges. Big institutions, like pension funds and university endowments, joining in to gain stock market exposure without unlimited risk. Everyday investors continuing to pour money in because they fear losing gains from 2024 and 2025.
| If 2026 proves as shaky as expected, buffered ETFs will rake in billions more while giving investors something rare: the ability to stay calm when markets aren't. |
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| | The Bottom Line | If you're worried about 2026 volatility, talk to your advisor. Buffered ETFs cap your gains but also cap your losses, a trade-off that works when staying invested matters more than maximizing returns. |
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| | | | | Important disclosures: This newsletter is provided for informational purposes only and does not constitute investment advice. All investments involve risk, including possible loss of principal. Please consult with your financial advisor before making investment decisions. |
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