Structured Investments
There are many types of structured investment products offered today and once
again, market inefficiencies may allow us to purchase shares at a discount to
their current index value. Presently, notes which accelerate your return
on a variety of different indexes, but with capped returns, may be a very
attractive alternative to other index investments. At Blue Bell Private
Wealth Management, we monitor many structured products on a real-time basis,
which allows us to purchase shares at a discount to current index value.
Structured Investments allow us to combine some of the best features of
closed-end funds and option writing, namely buying at a discount and having
downside protection. These investments may provide principal protection,
pay an enhanced yield or provide an enhanced return based on the performance of
an index, a basket of stocks or an individual stock.
Types of Structured Investments
Most Structured
Investments' characteristics can be defined by one of the
following general categories:
-
Principal Protected
Investments (PPNs)– these investments may be appropriate for
investors with a cautious outlook for the stock market and who want to
minimize the risk of their principal while still retaining some upside in the
appreciation (if any) of the underlying index. Investors who adopt this
strategy are willing to forego some upside appreciation in exchange for full
downside protection. Principal protected investments usually mature in
5-7 years time. [Example]
-
Reverse Convertibles (REVCONs) – these investments may be
appropriate for investors who want to minimize the risk of principal to an
individual stock or basket of stocks. Your return is limited to the
coupon payments. Investors will not participate in any appreciation
in the value of the linked shares in exchange for enhanced
yield. The contingent protection prevents losses if the underlying index
declines unless a trigger event occurs. [Example]
-
Enhanced Accelerated
Return Notes (EARNs) – these investments may be appropriate for
investors who believe the market will be flat to slightly up over the next
12-24 months. These investments will offer to double or triple the
return of the underlying index up to a maximum price. Enhanced return
structured investments allow for greater participation in the upside
appreciation of the underlying index. [Example]
-
Buffered Return
Enhanced Notes (BRENs) - these investments may be appropriate
for investors who believe the market will be slightly negative to slightly
positive over the next 12-24 months. These investments will
offer to double or triple the return of the underlying index up to a
maximum price and while limiting some of the downside. A buffer prevents
losses for up to a certain percentage decline in the underlying index. [Example]
-
Contingent Digital Notes (CDNs) - these investments may be appropriate for
investors who want to minimize the risk of principal but maximize their
returns in a flat to slightly up market over the term of the investment. At
maturity, if the final index value is equal to or greater than the initial
index, the notes will pay a fixed payment. The contingent protection prevents
losses if the underlying index declines unless a trigger event occurs.
[Example]
The examples contained herein are for
illustrative purposes only. This information is not intended to provide and
should not be relied upon for accounting, legal, regulatory or tax advice or
investment recommendations. The investments discussed herein are not suitable
for all investors. Investors should consider whether or not these products are
suitable for their needs. Please remember to contact Blue Bell Private Wealth Management, LLC if
there are any changes in your financial situation or investment objectives or if
you wish to impose, add or to modify any reasonable restrictions to our
investment management services. A copy of our current written disclosure
statement discussing our advisory services and fees continues to remain
available for your review upon request.
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