In declining markets (corrections or bear markets), losing less with a built-in buffer can be powerful. Without a buffer, if your portfolio declines, it subsequently needs to gain more than it lost to get back to even. However, a portfolio with a buffer (9%, 15% or 30%) needs far less of a gain to recoup losses.
During the past 66 years (1957-2023) there have only been three years (1974, 2002, 2008) when negative price returns of the S&P 500 exceeded 20%. And, there were only five years (1973, 1974, 2002, 2008, 2022) when negative price returns of the S&P 500 exceeded 15%.
If history is a guide, Buffer ETFs that offer moderate downside protection (15% – 20%), should provide a sufficient level of protection to help mitigate losses in most market environments.
S&P 500 Index Price Return 1957-2023
| Loss of more than -20% | Loss of -20% to -10% | Loss of -10% to 0% | |||
| Year | Index | Year | Index | Year | Index |
| 2002 | -23.37 | 2000 | -10.14 | 2011 | -0.003 |
| 1974 | -29.72 | 1969 | -11.36 | 2015 | -0.73 |
| 2008 | -39.49 | 1977 | -11.5 | 1994 | -1.54 |
| 1962 | -11.81 | 1960 | -2.97 | ||
| 2001 | -13.04 | 2018 | -6.24 | ||
| 1966 | -13.09 | 1990 | -6.56 | ||
| 1957 | -14.31 | 1981 | -9.73 | ||
| 1973 | -17.37 | ||||
| 2022 | -19.44 | ||||