How does a buffered ETF fit within a traditional portfolio?

Buffered ETFs, such as the ARK Defined Innovation Exposure Term (DIET) ETFs can serve as a tool for managing risk in a traditional investment portfolio.

Here’s how: 

• If an investor is nervous about volatility or large losses, the downside buffer gives some protection. 
• If an investor is nearing retirement or has short-term financial goals, the defined outcome structure can make returns more predictable. 
• Instead of exiting the market entirely, buffered ETFs allow investors to stay invested—with a safety net. 

Buffered ETFs might replace: 

• A portion of an investor’s equity (stock) exposure where they want less downside. 
• Structured notes or hedging strategies, because they offer similar benefits but are easier to access and trade. 
• Part of cash or bond holdings, if an investor wants higher potential returns with controlled risk. 

Buffered ETFs are not meant to replace a whole portfolio, but to complement it—especially when an investor wants innovation exposure with a more measured approach.