Structured notes in page

It pays (sometimes literally) to familiarize yourself with asset classes before jumping in. Consider these key points to set yourself up for success when investing with structured products:

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There is no free lunch.

The terms of each product can be very attractive, but investors may be sacrificing something to achieve these terms – it could be the inability to cost-effectively sell the product prior to its stated maturity date, or in some cases, a lack of income (dividends) being paid on the product. Whatever it might be, investors should carefully consider what they are “giving up” before purchasing any structured note.

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Diversification matters.

Notes linked to one sector often offer a greater return due to the high correlation of the underlying assets, which in turn can increase the risk of the product for the investor. Keep this in mind.

 

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Take an interest in how the product is created.

Work with an expert advisor who can guide you through the nuts and bolts of the product. Knowing how the returns are generated will help you better understand the risks you are taking. This will also help you understand how a note could complement traditional investments like common shares, preferred shares and bonds.

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Buy products you cannot create yourself.

Utilize products that exhibit payoff profiles that you cannot create yourself, or are more flexible. Tailor the product to your needs and if possible, create your own bespoke product.