This is a defined outcome ETF that gives exposure to a US equity index while using options to protect against deeper levels of losses. Over a one-year outcome period, it cushions a wider range of losses than a standard buffer ETF, but in exchange applies a lower upside cap. The structure is reset every February.

It suits conservative investors who want to invest in US stocks, are willing to accept a lower upside cap, and want protection against deeper levels of losses.

It is a passive (index-tracking) ETF managed by First Trust.

While giving exposure to a US equity index, the fund uses an options structure to cushion deeper levels of losses than a standard buffer over the one-year outcome period, and in return places a lower cap on upside returns. A new buffer and cap are set every February, and buying partway through the outcome period can change the protection and cap that apply.

• A structure that cushions deeper levels of losses
• A defined outcome design with a lower upside cap

Assets under management (AUM) are $457.8M, and the total expense ratio is an annual 0.85%.

Compared with other buffer and defined outcome ETFs such as BUFR and BUFD, the main points of comparison are the extent of protection, the cap level and the outcome period.

Deep buffer strategies tend to show more limited returns than the underlying index in rising markets because of the lower cap, while in falling markets they cushion a wider range of losses and sharply reduce drawdowns. The protection and cap that actually apply depend on whether you enter partway through the outcome period.

Defined outcome products tend to attract inflows from demand for downside protection when market uncertainty rises, and money sometimes moves into this group of products when demand grows for greater protection. It is also worth noting that performance varies with market conditions and the outcome period.

Its strength is deeper downside cushioning, while the lower upside cap, dependence on the outcome period, and changed terms for mid-period entry are points to consider.

For investing in US stocks directly without protection, direct substitutes include SPY and VOO, which track the S&P 500, and for a laddered buffer that spreads across several outcome periods, products such as BUFR are also worth comparing. Among buffer products with a different start month, products such as GFEB can also be considered. The three products shown in the table, BUFR, BUFD and PJAN, differ in protection range and structure, being a laddered buffer, a deep buffer and a buffer with a different start month, respectively. This ETF is distinguished by its deeper buffer structure based on a February start.

These are the points to review before investing in DFEB. The deeper downside cushioning is attractive, but the lower upside cap, dependence on the outcome period and limits of the cushion need to be checked in advance. It is best to approach the product only after fully understanding the defined outcome structure.

The lower upside cap and large declines that exceed the buffer are the main variables for performance, and buying partway through the outcome period changes the protection and cap that apply. Without a thorough understanding of the defined outcome structure, you may get results that differ from your expectations.

It is a suitable candidate for conservative investors who want to invest in US stocks while being protected against deeper levels of losses. For investing without protection, products such as SPY and VOO are options, and for a deeper buffer structure, it is advisable to choose this product after understanding how it works.