TUG and TUGN: Outcome-Oriented ETFs for a Successful Retirement

Investors face a dilemma. On the one hand, staying fully invested through market cycles is necessary to adequately save for retirement. Those who move to cash to time the market do so at their own risk, as timing the market is incredibly difficult to do, especially on a consistent basis. And a failure to remain invested in the market – whether caused by fear or emotion – could be detrimental to an individual’s retirement plan.

On the other hand, over long market cycles, a buy and hold strategy can be exposed to a severe market downturn. For instance, between March 27, 2000- October 8, 2002, the Nasdaq-100 Index® lost 83% of its value. What’s more, the index took almost 15 years to recover to its former peak. Anyone who stayed fully invested throughout this period missed the chance to capture growth elsewhere.

The possibility for these sorts of drawdowns poses a problem for advisors and investors wedded to a static 60-40 asset allocation model. Markets evolve: Is your approach keeping pace?

The Tactical Unconstrained Growth Model

Developed by the team at STF Investments, the Tactical Unconstrained Growth (TUG) model seeks to give investors an all-in-one balanced strategy that will adapt to the evolving market environment to enhance the investment experience. This tactical asset allocation model, which toggles between equity and fixed income exposure, can play offense or defense, when appropriate. It monitors a series of momentum, correlation, and volatility trends to determine an appropriate allocation to an underlying index.

A risk-on/risk-off approach can avoid exposure to outsized market moves by managing market risk through analysis of historical trends. If done correctly, this strategy has the potential to generate similar returns to the underlying index while reducing underlying volatility.

The TUG model has shown an impressive ability to limit risk:

• When applied to the Nasdaq-100 Index, the TUG model has the potential to eliminate 75% exposure to the worst days but may maintain 50% exposure to the best days from 2008-2022.
• Removing the top ±10 or ± 20 days from the Nasdaq-100® results in slightly improved performance, but without the volatility that drives investors to capitulate.
• The TUG model demonstrates an ability to distinguish between a bear market in 2007-2008 and a bear market correction in 2020.

Introducing TUG and TUGN: Core Portfolio Allocation and Income ETFs

Based on the Tactical Unconstrained Growth Model, the STF Tactical Growth ETF (TUG) is an actively managed fund that seeks long-term growth of capital with downside mitigation through tactical exposure to the Nasdaq-100 and U.S. Treasuries. As an ETF vehicle, TUG allows for tax efficient pivots between equities and bonds.

The STF Tactical Growth and Income ETF (TUGN) takes the same asset allocation approach as TUG but adds an income overlay via a call spread on NDX® index options that pays out up to 1% in monthly yield. The spread is established with a one-month expiration to reduce duration risk. In pursuing this strategy, TUGN’s goal is to generate consistent monthly income without sacrificing total return (yield at what cost).

TUG and TUGN demonstrate the value of active management in a passive world – generating alpha with traditional beta exposure. In doing so, they can help investors confidently plan for their retirements. What’s not to like about that?

_{Nasdaq®; Nasdaq-100^®, Nasdaq-100 Index^®; and NDX^® are registered trademarks of Nasdaq, Inc. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither Nasdaq, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding Nasdaq-listed companies or Nasdaq proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.}

_{© 2025. Nasdaq, Inc. All Rights Reserved.}