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Archive for the ‘Structured Notes’ Category

If It Sounds Too Good To Be True…

Posted by Larry Doyle on January 18th, 2011 9:04 PM |

The market feels firm. Your broker calls with an opportunity that sounds very appealing. You are sitting on cash and feel you may have missed the run in the market. Your cash is generating little to no return. You are contemplating taking a flyer on this “deal.”

Your broker is really pushing you and indicating a lot of people are getting involved in these deals. The highlighted returns look too good to be true. But wait, haven’t you seen this movie before? Remember, ‘if it sounds too good to be true…’ it typically is.

Another play on this same theme was highlighted at Bloomberg a few weeks back. This story deserves serious attention. Pay particular attention to the commissions and fees earned by Wall Street and the risks absorbed by you, the investor. (more…)

Caveat Emptor

Posted by Larry Doyle on February 25th, 2009 8:49 AM |

buyer-beware2The equity markets across all sectors have gotten off to a very rocky start for 2009 (down 15% on average). In the midst of that, a lot of institutions and individuals have fled to the safety of short term government funds, money market funds that now benefit from a government backstop, and other cash alternatives. On average, these investments pay Wall Street and fund managers perhaps anywhere from .1% to .3% of the assets being managed. Those fees will not make the managers rich anytime soon. How do they respond? Welcome to the world of “principal protected notes.” 

These structured notes are marketed to track an underlying index (say the S&P 500) while guaranteeing no loss of principal. Wow. Sounds like a great product. Where do I sign? Well, hold on just a second. I am not stating that structured notes do not have some degree of merit, but one needs to be very cautious in fully understanding how these notes work before purchasing. (more…)

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