Using Buffered ETFs: EDU #2607

Feb 18, 2026

Jacob Vonloh, an investment due-diligence pro who implements buffered and defined outcome ETFs, joins to explain how these products work. The conversation covers why buffers limit upside, when principal protection makes sense for retirement distribution, and how to position dollars into time- and purpose-segmented portfolios. They also discuss suitable horizons and alternatives to buffered ETFs.

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ADVICE

Don't Use Buffers During Accumulation

Avoid buffered products for long-term accumulation because caps and fees impede compounded upside over decades.
Stay aggressive in accumulation years and treat corrections as buying opportunities instead of seeking principal protection.

INSIGHT

Principal Protection Is A Spectrum

'Degree of principal protection' is a broader category than just buffered ETFs and includes many structured products and solutions.
Different products have varying strengths and weaknesses, so assess fit by role, not by category alone.

ADVICE

Plan First, Then Position Assets

Run a retirement plan analysis first and assign dollars to jobs and timing before choosing investments for each position.
Use that plan to determine which reserves need principal protection versus which can remain growth-oriented.

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If you would rather not listen to the guys’ banter about Jacob’s upcoming move to Iowa, Jim’s garden planning, and a listener correction about the word “imbibe” you can skip ahead to (33:30).

Chris’s Summary
Jim and I are joined by Jacob Vonloh as we discuss using Buffered ETFs prompted by a Morningstar article titled “Buffer ETFs Are Not for Everyone.” We explain how defined outcome ETFs use options to provide an explicit amount of loss protection over a given period while limiting potential gains, and we outline why these products are generally suboptimal for long-term investors. We then connect this to investment positioning, focusing on risk capacity, distribution planning, and why dollars assigned to delay-period Minimum Dignity Floor and Go-Go spending may require a degree of principal protection.

Jim’s “Pithy” Summary
Chris and I are joined by Jacob Vonloh as we take a listener-submitted Morningstar article—“Buffer ETFs are not for Everyone”—and use it to kick off what is going to be a series on principal protection. Morningstar does a very good job in this article laying out what it likes about buffered products, and it also makes some excellent points on where these types of products would fit and where they don’t fit. They’re not for everybody, but they could be of interest in certain cases, in a certain application, and we’re going to share how we use them.

What I want to do in this series is broaden the conversation. Buffered ETFs are just one type of principal protected product. There are multiple tools in that category, and we’re going to walk through where they fit into distribution planning. As you transition from accumulation into what I call the Venn diagram phase, and ultimately into distribution, you have to stop thinking of your portfolio as one big portfolio and start thinking in terms of smaller portfolios—investment positions—based on assigned spending. Dollars earmarked for a legacy position can be invested aggressively. Dollars earmarked for immediate spending—like the Go-Go reserve or the reserve for your MDF—need a degree of principal protection. This ties directly into the Secure Retirement Income Process and the See Through Portfolio and how we navigate asset positioning in retirement.

Show Notes: Morningstar Buffered ETFs article

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