How does the FLMX ETF work?

The FLMX ETF invests in a portfolio of FLEX Options that reference the performance of the S&P 500 ETF and the QQQ ETF. It seeks to provide returns that match the performance of these underlying ETFs, but with a capped upside return and a buffer against losses.

What is the underlying strategy of the FLMX ETF?

The FLMX ETF uses FLEX Options to create a buffer against the first 9% of losses in the S&P 500 ETF and aims to supplement the returns with gains from the QQQ ETF, up to a specified cap on upside returns.

How are the upside returns capped in the FLMX ETF?

The FLMX ETF sets an upside return cap, known as the S&P 500 ETF Cap and QQQ ETF Cap, which represents the maximum percentage return the Fund can achieve from the FLEX Options referencing each underlying ETF. The cumulative cap, known as the Cumulative Fund Cap, is the sum of these two caps.

What is the role of the buffer in the FLMX ETF?

The FLMX ETF uses the buffer to mitigate losses in the S&P 500 ETF. If the S&P 500 ETF's share price decreases by up to 9%, the fund seeks not to participate in any of those losses. However, if the decrease exceeds 9%, the fund will participate in losses exceeding that threshold on a one-to-one basis.

6 min read

By Beqa Bumbeishvili, ETF Insider

What is the FLMX ETF ?

Q: How are the upside returns capped in the FLMX ETF?

The FLMX ETF sets an upside return cap, known as the S&amp;P 500 ETF Cap and QQQ ETF Cap, which represents the maximum percentage return the Fund can achieve from the FLEX Options referencing each underlying ETF. The cumulative cap, known as the Cumulative Fund Cap, is the sum of these two caps.

Q: What is the role of the buffer in the FLMX ETF?

The FLMX ETF uses the buffer to mitigate losses in the S&amp;P 500 ETF. If the S&amp;P 500 ETF's share price decreases by up to 9%, the fund seeks not to participate in any of those losses. However, if the decrease exceeds 9%, the fund will participate in losses exceeding that threshold on a one-to-one basis.

In the world of finance, Exchange-Traded Funds (ETFs) have gained immense popularity among investors due to their diversified and cost-effective nature. One such ETF that has been making waves is the FLMX ETF. In this article, we will delve into the FLMX ETF's overview, its underlying assets and exposure, the benefits of investing in it, and important considerations before making an investment decision.

FLMX ETF: Overview

The FLMX ETF is an exchange-traded fund that aims to replicate the performance of the FTSE Mexico Capped Index. This index is designed to measure the performance of Mexican large- and mid-capitalization stocks. Maintained and calculated by FTSE Russell, the FTSE Mexico Capped Index follows a free float-adjusted market capitalization weighting methodology. To ensure diversification, the index applies a capping methodology, limiting any single issuer's weight to 25% of the total index weight, while issuers with weights above 5% do not cumulatively exceed 50% of the index's weight.
As of May 31, 2023, the FTSE Mexico Capped Index comprised 37 securities with varying capitalizations, ranging from $74 million to $67.16 billion. The FLMX ETF endeavors to invest at least 80% of its assets in the component securities of this index, thereby providing investors with exposure to a broad spectrum of Mexican companies.

FLMX ETF: Underlying and Exposure

The FLMX ETF employs a "passive" or indexing investment approach to closely correspond to the performance of the FTSE Mexico Capped Index before fees and expenses. To achieve this, the fund can utilize either a replication strategy or a representative sampling strategy.
Under the replication strategy, the FLMX ETF invests in all the component securities of the FTSE Mexico Capped Index in their respective weightings. However, under certain circumstances, full replication may not be possible or practical. In such cases, the fund may adopt a representative sampling strategy, selecting securities that collectively have an investment profile similar to that of the index, including risk factors, performance attributes, market capitalization, and industry weightings.
Additionally, the FLMX ETF may incorporate equity futures and equity total return swaps in its investment approach. These financial instruments offer opportunities to enhance returns and improve tracking performance. The fund may also enter into foreign currency forward contracts and/or currency futures contracts to mitigate currency exposure risks and facilitate local securities settlements.

FLMX overlap What is the FLMX ETF ?

FLMX ETF: Benefits to Invest

Investing in the FLMX ETF offers several advantages to investors. First and foremost, it provides exposure to a diverse basket of Mexican stocks, reducing the impact of individual company performance on overall returns. This diversification can help spread risk and potentially improve long-term investment outcomes.
Furthermore, as an ETF, FLMX offers intraday liquidity, enabling investors to buy and sell shares throughout the trading day at market prices. This liquidity and flexibility enhance the ease of investment and allow investors to react quickly to market movements.
Additionally, the passive investment strategy adopted by the FLMX ETF typically incurs lower management fees compared to actively managed funds. These lower fees contribute to cost-efficiency, allowing investors to retain a larger share of their investment returns.

FLMX ETF: Considerations before Investing

While the FLMX ETF offers attractive features, potential investors should consider certain factors before making investment decisions. Firstly, as with any investment, it's essential to conduct thorough research and assess personal financial goals and risk tolerance.
Secondly, investors must understand the fund's exposure to specific industries or sectors. As of May 31, 2023, the FTSE Mexico Capped Index was concentrated in the consumer staples sector, which means the FLMX ETF may also have a significant exposure to this industry.

Lastly, investors should carefully evaluate the ETF's performance track record, expense ratio, and trading volume to ensure it aligns with their investment objectives.

Conclusion

In conclusion, the FLMX ETF presents an opportunity for investors to gain exposure to the dynamic Mexican stock market through a diversified and cost-effective investment vehicle. By replicating the performance of the FTSE Mexico Capped Index, this ETF aims to provide investors with a well-rounded investment option.

Disclaimer: This article is for informational purposes only and does not provide any investment advisory services. Before making any investment decisions, it is crucial to consult with a qualified financial advisor to assess individual circumstances and risk tolerance.

FLMX ETF issuer
FLMX ETF official page

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FAQ

What is the FLMX ETF?
The FLMX ETF, also known as the Innovator Double Stacker 9 Buffer ETF, is an exchange-traded fund that aims to provide investors with returns based on the performance of the S&P 500 ETF and the Invesco QQQ TrustSM, Series 1, subject to specific upside return caps and a buffer.
How does the FLMX ETF work?
The FLMX ETF invests in a portfolio of FLEX Options that reference the performance of the S&P 500 ETF and the QQQ ETF. It seeks to provide returns that match the performance of these underlying ETFs, but with a capped upside return and a buffer against losses.
What is the underlying strategy of the FLMX ETF?
The FLMX ETF uses FLEX Options to create a buffer against the first 9% of losses in the S&P 500 ETF and aims to supplement the returns with gains from the QQQ ETF, up to a specified cap on upside returns.
How are the upside returns capped in the FLMX ETF?
The FLMX ETF sets an upside return cap, known as the S&P 500 ETF Cap and QQQ ETF Cap, which represents the maximum percentage return the Fund can achieve from the FLEX Options referencing each underlying ETF. The cumulative cap, known as the Cumulative Fund Cap, is the sum of these two caps.
What is the role of the buffer in the FLMX ETF?
The FLMX ETF uses the buffer to mitigate losses in the S&P 500 ETF. If the S&P 500 ETF's share price decreases by up to 9%, the fund seeks not to participate in any of those losses. However, if the decrease exceeds 9%, the fund will participate in losses exceeding that threshold on a one-to-one basis.