As part of our commitment to helping clients stay informed and well-positioned for long-term success, we continue to explore alternative investment strategies that support financial goals and promote portfolio longevity. In this month’s newsletter, we’re highlighting one of the strategies we’re currently using to provide more certainty in an uncertain economy: structured notes.
In today’s market, it can feel like you're either taking too much risk or missing out. Structured notes are a way to strike a better balance – they can offer some downside protection with the potential for meaningful returns. Think of them as "custom-built investments" designed to match a specific goal or market view.
So, what are structured notes?
Structured notes are investments issued by major banks that combine a bond with a built-in strategy linked to something like the S&P 500. They can be designed for growth, income, or even principal protection. The catch? You usually have to hold them to the end (called the maturity date), and they’re not right for every investor.
Common Types You’ll See:
Growth notes aim to give you stock market upside, but with a buffer against losses—like taking the edge off a drop of up to 20%. Income notes pay attractive interest payments, as long as the market doesn't fall too much. Market-linked CDs are similar to regular CDs but with the chance to earn more based on market performance. The bonus? Your principal is FDIC insured.
Why Clients Are Considering These Right Now:
Volatility is real. Structured notes can offer some peace of mind with buffers that help protect your investment. They can create predictable outcomes in uncertain times. For folks who don’t need to touch this money right away, they can be a smart part of a diversified plan.
Quick Example:
Let’s say you invest in a growth note tied to the S&P 500 with a 20% buffer. If the market drops 15%, you still get your full principal back. If it rises 10%, you might earn 12% based on the note’s terms. But if it drops more than 20%, you start to feel that loss beyond the buffer.
Important to Know:
Structured notes come with risks. If the issuing bank fails, your money is at risk. They’re designed to be held to maturity, so you can’t easily sell them early. You also give up some upside or dividends in exchange for protection or income.
Who They Might Be Right For:
Structured notes may be a good fit for high earners who want to put excess cash to work more strategically. They can also work well for pre-retirees or retirees looking for downside protection, and for business owners with longer-term planning windows.
Bottom Line:
Structured notes aren’t one-size-fits-all, but they can be a great tool in the right situations. If you’re looking for a more custom, protective way to grow or preserve your assets in a rocky market, it might be worth the conversation.
Disclosure: Structured notes are complex investments. They involve risks including loss of principal, lack of liquidity, and credit risk. They are not suitable for all investors. Please consult your financial advisor before making any investment decisions.
If you are interested in discussing this topic further or any other financial related questions feel welcome to book time with your VPG Planner. Don’t have VGP Planner yet, use our booking page to get started: https://calendly.com/vpg-financial-planners-book-page
CRN202805-8695887