Featuring a 7-Minute Educational Video with Blair Tushaus
Midterm years can feel like riding through choppy coastal water. One week, markets are reacting to geopolitical conflict. The next week, oil prices are moving. Then, before investors can fully catch their breath, the market may rally and leave people wondering if they missed the boat.
That is exactly why I want to talk about buffers.
In this post, I am walking through my “buffer pick of the month.” Or, as one of our clients joked, maybe we should just call it the “Buffer Blair” segment.
The goal is simple: show how a defined buffer strategy may help investors participate in upside while giving their portfolio a defined layer of downside protection. That can matter in any market environment, but I believe it is especially relevant in a midterm year where volatility may stay on the trail with us for a while.
Historically, midterm election years have shown higher market volatility than non-midterm years. Capital Group’s review of S&P 500 data from 1970 through 2025 found that midterm years had a median standard deviation of returns near 16%, compared with 13% in other years.
In the current market environment, we have seen geopolitical conflict, an oil spike, drawdowns, volatility, and then a significant gain in April.
That is a lot for investors to process.
And when markets move that quickly, it can be tempting to ask the wrong questions:
“Should I get out?”
“Should I get back in?”
“Did I miss the rally?”
“Is the next drop coming?”
Those are normal questions, but they are hard to answer with precision. Nobody gets a crystal ball with their investment account.
That is why I like defined investment strategies. Instead of guessing every market turn, we can try to define the ride ahead of time. We can ask: What are we following? How long are we following it? How much downside protection do we have? What is the upside potential?
That framework may help investors make more disciplined decisions, especially in a midterm year.
The buffer I highlighted in this video was a defined position we created specifically for our clients.
Here were the basic terms:
That is the kind of risk-reward setup I like to analyze.
We chose the S&P 500 because it has volatility, but historically it may not be as concentrated or tech-heavy as the Nasdaq-100 or QQQs. The S&P 500 is still market-cap weighted, so the largest companies carry more influence, but it includes exposure across multiple sectors.
S&P Dow Jones Indices describes the S&P 500 as a large-cap U.S. equity benchmark that includes 500 leading companies and covers approximately 80% of available U.S. market capitalization.
By comparison, the Nasdaq-100 includes 100 of the largest non-financial companies listed on Nasdaq and includes major industry groups such as computer hardware, software, telecommunications, retail/wholesale trade, and biotechnology. The Russell 2000, on the other hand, tracks approximately 2,000 small-cap U.S. stocks.
So for this specific buffer, we chose the S&P 500 and followed it over one quarter.
There are four main components to a buffer strategy.
First, we choose what we are following.
That could be the S&P 500, the Nasdaq, the Russell, or even a specific stock. The index or investment we follow is the reference point for the buffer.
In this example, we followed the S&P 500.
Second, we choose the length of time.
That could be a month. It could be a quarter. It could be a year. It could be two years. In some cases, it could be longer, but in my experience, those longer durations are less common for the kinds of conversations we are having with many retirees and pre-retirees.
For this buffer, we used one quarter.
Third, we define the downside protection.
This is the seatbelt.
We are not getting on the highway without checking that the car has four wheels and a seatbelt. So why would we invest without thinking through the downside?
A buffer is designed to “buff out” losses up to a certain level. In this case, the buffer was 10%.
If the S&P 500 were down 8%, the 10% buffer would be designed to absorb that decline. If the S&P 500 were down 9.5%, the 10% buffer would still be designed to absorb that decline.
If the S&P 500 were down 11%, the investor would not be down 11% in this simplified example. The first 10% would be buffered, and the investor would be down 1%, before considering fees, costs, taxes, liquidity, and the specific terms of the investment.
That does not mean the strategy has no risk. It means the risk may be more clearly defined.
Fourth, we look at the upside.
In this specific example, the upside potential was 4.36% for the quarter.
That is not the same as saying the investor is guaranteed 4.36%. It means that if the S&P 500 moved up enough during that defined period, the investment could potentially capture up to that capped amount, subject to the terms of the position.
That is the tradeoff. We may receive downside protection, but we usually accept a cap on the upside.
Investor.gov notes that structured products and similar investments can involve important risks, including complexity, issuer credit risk, liquidity limits, and terms that may cap or limit returns. Investors should understand the specific terms before investing.
During the first quarter, we saw the market move down from peak to trough by roughly the high-single digits, based on the market environment discussed in my video.
That was important because this specific buffer had 10% downside protection.
So, for clients who held that defined position during that period, the first-quarter drawdown was within the buffer range. In other words, that position did what it was designed to do.
Now, could the market have gone down 11%? Absolutely.
Could it have gone down 15%? Yes.
Could it have gone down more than that? Of course.
But in this example, if the market had been down 11%, the client would have been down 1% in that defined position, before costs, taxes, fees, liquidity considerations, and other product-specific terms.
That is why I liked the setup. The risk-reward made sense for that moment.
We were in a midterm year. We expected volatility. We had already seen markets react to conflict, oil, and uncertainty. And we had a short-duration position that gave us a 10% buffer over one quarter with 4.36% upside potential.
That is not bad. In fact, for the objective we were solving for, I thought it was a strong fit.
Let’s talk about that 4.36%.
Because this was a one-quarter position, 4.36% was not an annual return. It was the upside potential for that quarter.
If you simply multiplied 4.36% by four quarters, that would equal 17.44%.
But that is just simple math, not a promise or projection. Markets do not move in neat quarterly boxes. New buffer terms may be different. The next quarter may not offer the same upside. The market may not cooperate. And investors still need to consider fees, costs, taxes, liquidity, and whether the strategy fits their broader plan.
Also, four separate quarterly 10% buffers should not be viewed as one guaranteed 40% shield. Each buffer applies to its own defined period, and the timing, depth, and duration of market drawdowns can change the actual experience.
Still, the point remains: the upside potential was meaningful relative to the downside protection we were receiving.
That is the kind of tradeoff I want to evaluate for clients.
Another important point: with an investment like this, you may not be stuck for the entire period.
In this example, if the position reaches its 4.36% upside potential before the quarter ends, we may be able to sell it and move to the next opportunity.
That is where active wealth management comes in.
Proper wealth management should not just set a portfolio and walk away. It should include risk-reward analysis. It should evaluate different buffers, different degrees of downside protection, different upside caps, and different market scenarios.
The goal is not to be flashy. The goal is to manage the ride.
I want to be clear: I am not saying every client should use one buffer, one index, one term, and one level of protection.
That is not how we think about it.
We may use multiple buffers for clients, depending on their situation. Some may have different levels of protection. Some may have more upside potential and less downside protection. Some may have longer durations. Some may have shorter durations.
The right mix depends on the client’s retirement goals, income needs, tax situation, risk tolerance, time horizon, and overall financial plan.
That is why I believe buffers can be useful. They give us more tools. They allow us to be more precise. They can help us design a portfolio that is not simply “all risk” or “no risk.”
Most retirees I talk to do not want either extreme.
They want to grow their money, but they do not want one bad market stretch to knock them off the retirement trail.
So, how should you invest in a midterm year?
I believe you start by accepting that volatility may happen.
Do not build a plan that depends on calm markets. Do not assume the next rally will last forever. Do not assume every drawdown is the end of the world. Instead, define your strategy.
Ask yourself:
What part of my portfolio needs growth?
What part of my portfolio needs protection?
How much downside can I actually tolerate?
How much upside am I willing to give up for a smoother ride?
Do I understand the terms of the investments I own?
Do I have a plan for what to do if markets move sharply up or down?
That is the conversation I think investors should be having in a midterm year.
Not “how do I perfectly time the market?”
But “how do I build a portfolio that may help me stay disciplined when the market gets loud?”
At Tushaus Wealth Management, our investment management approach includes customized investment strategies, capital preservation, long-term growth, and risk management techniques designed to help reduce exposure to market volatility.
I like buffers. Clearly.
But buffers are not magic.
They do not remove all risk. They do not guarantee gains. They do not mean an investor cannot lose money. They can come with caps, costs, liquidity considerations, tax implications, issuer risk, and other terms that need to be reviewed carefully.
That is why the details matter.
A buffer can look attractive on the surface, but the real question is whether it fits the client’s plan. What is the duration? What is the index? What is the downside protection? What is the upside cap? What happens if the market goes down more than the buffer? What happens if the market rallies past the cap? What are the costs? What are the risks?
Those are the questions we ask before using these strategies.
Midterm years can bring market volatility, but volatility can also create opportunities for investors who have a plan. In this video, I walked through a one-quarter S&P 500 buffer strategy with a 10% downside buffer and 4.36% upside potential. That kind of defined outcome approach may help investors stay invested while managing risk more intentionally. If you want to learn more about how buffers may fit into your retirement portfolio, I invite you to book a free 1-hour strategy session with one of our advisors. It’s completely free and there’s no obligation to move forward with us.
A buffer investment strategy is designed to absorb a stated amount of downside loss over a defined period. For example, a 10% buffer may help absorb the first 10% of losses in the underlying index. If the index falls more than the buffer amount, the investor may participate in losses beyond that level.
Buffers may help investors manage volatility by defining part of the downside risk in advance. Midterm years can bring uncertainty, and markets may react to policy, election expectations, interest rates, oil prices, and geopolitical events. A buffer strategy may help investors stay more disciplined instead of reacting emotionally to every headline.
In the video, I highlighted a one-quarter buffer tied to the S&P 500. It had a 10% downside buffer and 4.36% upside potential for that quarter. This was a defined position created specifically for our clients, and the terms may not be available in the same way in the future.
No. The 4.36% figure was the upside potential for that specific quarterly buffer, not a guaranteed return. Whether an investor receives that return depends on how the underlying index performs and the specific terms of the investment. Fees, costs, taxes, liquidity, and product structure may also affect results.
If the market falls beyond the buffer, the investor may participate in losses above that buffer amount. For example, in a simplified 10% buffer example, if the index falls 11%, the investor may be down 1% before costs, taxes, fees, and other terms. The buffer may reduce downside exposure, but it does not eliminate all risk.
In this example, we chose the S&P 500 because it provided broad large-cap U.S. equity exposure. The Nasdaq-100 may be more concentrated in large non-financial companies listed on Nasdaq, while the Russell 2000 is more focused on small-cap U.S. stocks. The right index depends on the client’s objective, risk tolerance, and market outlook.
Not always. Depending on the structure and liquidity of the investment, it may be possible to sell before the term ends. In the example from the video, if the position reached its upside potential early, we could evaluate selling it and moving to the next opportunity. Investors should understand any liquidity limits or pricing risks before investing.
No. Buffer strategies may be helpful for certain retirees, pre-retirees, or investors who want defined downside protection with some upside participation. But they are not appropriate for everyone. They should be reviewed as part of a full financial plan that considers income needs, taxes, time horizon, risk tolerance, and estate goals.
The information presented in this piece is the opinion of Tushaus Group, LLC and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources but no liability is accepted for any inaccuracies. This is for information purposes and should not be construed as an investment recommendation. Past performance is no guarantee of future performance. Tushaus Group, LLC is a Registered Investment Advisor.