You may or may not have heard of a structured note investment. Whether you have or have not is not really the point of this segment. It is the deeper factors of this financial matter that you should be aware of that I wish to share with you. On that note, lets jump straight into our topic.
A structured note is a debt owed to you by an investment bank. The investment bank uses securities whose prices are valued by other underlying assets. These underlying assets are various and unlimited stocks in which the bank seeks to sell to make money.
If you hold a structured note, you get to choose how it is paid out and exposed. In simpler terms, you can choose the amount of risk you are willing to take on the note’s arrangement. You can set it up to suit your desired exchange and financial projection. However, the note’s structure is like a seesaw. You may set it up to have more of a specific gain and therefore have to give up gaining in another area of return.
You and I both do not like when people (or banks) owe us money. Well, as you are dealing with debt owed to you by an investment bank, this is a risk you take. That is right. If the investment bank backs out on paying you the debt, the note no longer has value regardless of what happens in the stock market.
Last, but not the least, most structured notes do not trade after they are issued. It is literally a gamble in the way you structure it, but I totally understand that some investors are okay with gambling.