Navigating Volatile Markets: Time to Check Out 100% Downside Protection ETFs?

Key Points

• Buffer ETFs can help investors mitigate risk by targeting a level of downside protection in exchange for a cap on upside

• Investors can choose the level of downside risk protection based on their risk appetite and portfolio requirements

• These can be used as strategic portfolio allocation to smooth returns, or potentially as a tactical response to market volatility

This content is marketing material. This article is not investment advice, capital is at risk.

Investing in Times of Volatility

When markets get volatile, many investors simply don’t know what to do. You’ll hear the usual ‘diversification’ stuff, but diversifying across stocks and bonds may not sufficiently mitigate risk. Equally, holding cash and trying to time the market can mean investors are taking their eyes off the long-term prize.

Innovation in the ETF space has been significant lately and we have seen a big increase in the range of investor products available, including the launch of 100% downside protection ETFs, which target downside protection in exchange for capping the upside potential. While this may not be a suitable long-term strategy, it may offer some shelter from significant bouts of market volatility and support capital preservation in turbulent times, such as we have seen in 2025.

Buffer ETFs Explained

Buffer ETFs are sometimes known as “structured outcome” or “defined outcome” ETFs. About 400 of these exist and hold around $70 billion in assets.

BlackRock offers a number of buffer ETFs that track the share price return of the underlying ETF, the iShares Core S&P 500 ETF (IVV). By using a combination of Options, these provide downside protection up to a certain amount of IVV losses over a predetermined period.

DMAX - iShares Large Cap Max Buffer Dec ETF - up to 100% downside protection (minus fees) with a starting upside return cap of 7.90%. That means that your upside is limited to 7.90% over the period of the hedge, which expires at the end of December.

MAXJ - iShares Large Cap Max Buffer Jun ETF - up to 100% downside protection (minus fees) with a starting upside return cap of 10.64%. The hedge expires at the end of June. 

GMAY - First Trust meanwhile runs the FT Vest U.S. Equity Moderate Buffer ETF – May. It seeks to match the price return of the SPDR S&P 500 ETF Trust to a predetermined upside cap of 12.32% while providing a buffer (before fees and expenses) against the first 15% of underlying ETF losses, over the period from May 19, 2025 to May 15, 2026.

There are lots of other providers and products. Type ‘buffer’ in the search instrument panel to locate the full range available on Saxo.

Things to Consider

• Be careful about the potential downside and upside left in the remaining hedge period before the buffer/cap is hit.

• If you don’t buy on the first day of the defined investment period you would need to refer to the issuer’s website to understand how your potential outcomes are affected

• Specifically, if you buy one of these ETFs after day one of the investment period you may not have the full downside protection as marketed.

• You can generally buy and hold these ETFs and the buffer resets based on where the underlying market traded after the investment period ends.

• These are buy-and-hold ETFs designed for long-term, strategic allocation within an investment portfolio. 

• Whether these are suitable will depend on a range of factors, such as one’s overall risk tolerance and existing portfolio makeup.

• Buffer ETFs are typically more expensive than vanilla stock ETFs