Market-Index-Target-Term-Securities (MITTS), such as ticker symbol RPM, provides upside potential of the stock market and downside protection if held to maturity (year 2009). MITTS go up in proportion to the underlying index. RPM is based on Russell 2000. Let’s suppose you buy RPM at $10 (at face value); the Russell 2000 Index goes up $12 next year. The return should be 12%. However, if the Russell 2000 Index goes down 30%, you will lose nothing unless you have to sell. At maturity, you will get the face value plus any appreciation of the index. It seems to be similar to a bond.
Possible drawbacks: your money will be tied up if the underlying index is under water. The MITTS do not track the Index perfectly. As of January, 2005, ^RUT returns 30% while RPM returns 10% since 2002.
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