This is an actively managed ETF that tracks the price movements of the Nasdaq 100 Index while spreading a buffer strategy, which protects against losses up to a set level during declines, across quarterly tranches. In rising markets, it captures gains only up to a predetermined upside limit (Cap), and in falling markets, it manages overall volatility through its cushioning effect.

It is suited to conservative investors who want long-term exposure to Nasdaq growth but also want to limit losses during sharp market declines.

First Trust launched the ETF in 2021, and it uses an active management approach.

The fund holds four individual Nasdaq buffer ETFs in set proportions. By combining the downside protection offered by each underlying asset, it smooths the return profile of the overall portfolio, and each quarter it rolls out the fund that reaches maturity, continually refreshing the level of protection.

• Provides downside loss protection on the Nasdaq 100 Index
• Spreads entry timing risk through quarterly laddering

Assets under management (AUM) stand at $1.7B, and the total expense ratio (Expense Ratio) is 1.00% per year.

Unlike BUFR and BUFD in the table, which target the S&P 500 Index, BUFQ specializes in the tech-heavy Nasdaq 100 Index. Compared with single-buffer products that reset in a specific month, such as PJAN and FJAN, BUFQ stands out by offering balanced protection throughout the year through laddering.

In tech-led bull markets, the fund follows a portion of the index's gains and delivers steady results, but because of the upside cap, its overall performance can trail the index return during sharp index rallies.

When market volatility rises or concerns about elevated valuations grow, capital tends to flow in steadily from investors who want to stay in the market while managing downside risk.

This is a moderate-risk, moderate-return product that pursues Nasdaq growth and the stability of a buffer strategy at the same time.

QQQ is the go-to choice for investing in the index itself, but if you need downside risk management, a buffer strategy can be effective. You can also buy BUFQ's constituent funds, such as QMAR, QJUN, QSPT, and QDEC, directly to adjust protection at a specific point in time, and you can respond flexibly to market conditions by keeping the laddered strategy or shifting weight into individual buffer funds.

Here is a key checklist to review before deciding to invest in BUFQ. You should clearly understand the structure of the buffer strategy and the resulting gain and loss profile under the laddering approach.

If the index plunges by more than the set buffer level, the investor bears any losses beyond that point in full, so keep in mind that this is not a principal-protected product.

It is a suitable alternative for investors who want to manage Nasdaq 100 volatility while still participating in market growth. Even though it limits some of the upside, it is a useful tool when downside protection in falling markets is a priority.