You read yesterday about Goldman Sachs’s latest bet on “Boomer Candy,” otherwise known as defined outcome funds. In July, Morningstar’s John Rekenthaler explained the many flavors of “Boomer Candy,” writing about the various names of the different strategies being employed by these funds:
The phrase is not only catchy, but it neatly summarizes the funds’ appeal. The young frequently court danger, dabbling with cryptocurrencies and meme stocks, but their parents tend to be less brave. Rather than assume greater risk in the hope of earning higher returns, older investors prefer a tamer path. Give them securities that act mostly like stocks while being less volatile.
Enter “boomer candy.” The Journal uses the term to describe two varieties of exchange-traded funds. Each flavor, regrettably, has multiple names. One is dubbed “covered call,” or “equity premium income,” or (by Morningstar) “derivative income.” The other group is usually referred to as “buffer” but is sometimes called “structured.” It currently lands in the options-trading Morningstar category. In October, though, such funds will be moved to their own category: defined outcome.
Action Line: Whatever the name is that you’re seeing, be sure to do your due diligence when assessing defined outcome funds. When you want to talk about a plan for your retirement, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
