What is IMAY? (Pros, Cons, and Strategies)

As global markets continue to evolve, diversifying your investments with international assets has become increasingly important. One such opportunity is the Innovator International Developed Power Buffer ETF - May (IMAY). This unique ETF (Exchange-Traded Fund) aims to offer investors exposure to international developed markets while offering a buffer to help minimize potential losses. In this blog post, we'll dive deep into what IMAY is, its advantages and disadvantages, and the strategies you can employ for optimal results.

What is IMAY?

Innovator International Developed Power Buffer ETF - May, commonly known as IMAY, is a unique ETF focused on providing exposure to international developed markets with a risk management twist. Unlike traditional ETFs, IMAY incorporates a "buffer" strategy aimed at reducing downside risk while capping the upside.

IMAY primarily tracks the performance of the MSCI EAFE Index, which includes companies from Europe, Australasia, and the Far East. However, it boasts a structured outcome approach designed to limit potential losses.

Key Features of IMAY

  • Buffer Mechanism: IMAY offers a 15% buffer against losses over a one-year period, starting each May.
  • Cap on Gains: To provide the buffer, IMAY caps the potential gains. The cap rate is set annually and can vary depending on market conditions.
  • Exposure to International Developed Markets: The ETF focuses on stocks from developed international markets, excluding the U.S. and Canada.

IMAY Composition

IMAY holds a diverse array of companies from developed markets such as Japan, Germany, the United Kingdom, and Australia. The MSCI EAFE Index, which it tracks, includes large and mid-sized companies across various industries—excluding companies from North America.

Pros of IMAY

Downside Protection

One of the primary advantages of IMAY is its built-in buffer strategy. The 15% buffer offers a layer of protection against market downturns. In other words, investors are shielded from the first 15% of losses over a one-year period. This makes IMAY particularly attractive to conservative investors who want to participate in international markets without exposing themselves to significant risks.

Diversification

IMAY offers exposure to a broad array of international developed markets, providing a level of diversification that can be beneficial to an investment portfolio. Investing in IMAY means you're not solely dependent on the performance of U.S. companies, thereby spreading your risk across a broader geographic and economic spectrum.

Structured Outcomes

IMAY's structured outcome approach provides a level of predictability often absent in traditional ETFs. Investors know the cap rate and buffer level upfront, which allows for more strategic planning.

Convenience

IMAY offers a convenient way to invest in international markets with downside protection. You don't need to manually execute complicated strategies or purchase individual stocks to achieve this level of risk management and diversification.

Cons of IMAY

Limited Upside Potential

The downside protection in IMAY comes at the cost of capped gains. The cap rate is set annually and can vary, but it means that in strong bull markets, your potential for high returns is limited. Investors seeking high growth might find this restriction a significant drawback.

Expense Ratio

IMAY's more complex structure generally comes with higher expenses compared to traditional ETFs. This expense ratio can eat into returns over time, particularly in low-growth or sideways market conditions.

Complexity

IMAY's structure can be complex and may not be fully understood by all investors. Understanding the nuances of the buffer and cap mechanism is crucial for anyone considering this ETF.

IMAY Investment Strategies

IMAY is well-suited for investors seeking to both diversify their portfolio internationally and manage downside risk. Below are a few strategies to consider when investing in IMAY.

Strategic Long-Term Holding

Given its downside protection mechanism, IMAY can be a strategic long-term holding within a diversified portfolio. The 15% buffer provides peace of mind against significant market downturns, making it a stable addition for those wary of international market volatility.

Pairing with High-Growth ETFs

Consider pairing IMAY with other high-growth or U.S.-centric ETFs to balance the capped gains while diversifying. This blended approach can help you tap into the high-growth potential of other markets while still benefiting from the safety net that IMAY offers.

Dollar-Cost Averaging

To maximize the benefits of IMAY, consider employing a dollar-cost averaging strategy. By investing a fixed amount regularly, you can mitigate the timing risk associated with market entry points, taking full advantage of IMAY's structured outcomes over the long term.

Retirement Portfolios

With its downside protection, IMAY can be a valuable component of retirement portfolios. It affords retirees or near-retirees exposure to growth from international markets while providing a level of protection against significant losses, which is crucial when capital preservation becomes a priority.

Conclusion

IMAY presents a unique proposition for investors seeking to diversify internationally while managing downside risks. While the capped upside might not be suitable for everyone, particularly those looking for high growth, its structured outcome approach provides a level of predictability and safety that many conservative investors will find appealing. By understanding its complex structure and employing strategic investment strategies, investors can make the most out of what IMAY has to offer.

Find ETFs (Search all ETFs listed in the US)

ELQDPEYBLCNDBEMIBDRODEHNDLARBAIFDCZARFXNIDUSPXNHYXUDFIS