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Experience with Structured Notes
11-14-2017, 11:38 AM
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#1
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Recycles dryer sheets
Join Date: Jul 2017
Posts: 54
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Experience with Structured Notes
Hi everyone. Does anyone have any insight, opinions on structured notes. I'm thinking about purchasing a few of these products - one tied to the Euro Stoxx 50 and the other to the Russell 2000 that are offered through Citibank. Thanks in advance!
-bee
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11-14-2017, 11:43 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,022
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Structured notes: a financial instrument sold rather than bought
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... a real stinker of a product that at first glimpse appears to be the answer to your prayers, but really is just one more way Wall Street is going to separate you from your money. The product is the structured note and it advertises its ability to benefit from good stock market performance while simultaneously providing protection against the bad market performance. The cost for this protection is covered by modifying the benefit. It sounds good, but unfortunately, the cost of the protection usually outweighs and undermines any benefit.
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https://www.investopedia.com/article...ured-notes.asp
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Numbers is hard
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11-14-2017, 11:58 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Sep 2012
Posts: 1,570
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My understanding is Structured Notes are a wonderful source of profit for the financial services industry.
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You know that suit they burying you in? Thar ain’t no pockets in that suit, boy.
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11-14-2017, 12:03 PM
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#4
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,362
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And among their other attractive aspects:
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Structured Note terms are generally between 18 months and six years and it is important that you can afford to tie up your money for that period, because your principal is only protected when Structured Notes are held for their full term.
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Investors assume full credit risk of the Issuer and/or the Guarantor. This means that should the Issuer and/or the Guarantor become insolvent or fail in any other way you may not receive back any of your investment monies, not even the initial investment amount as the principal protection will not apply in this situation.
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I thought growing old would take longer.
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11-14-2017, 12:14 PM
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#5
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Recycles dryer sheets
Join Date: Jul 2017
Posts: 54
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RE Wahoo, gc & braumeister - thanks so much for the insight. They definitely sound pretty scary. I'm looking to take some of the money I have in cash right now and put it to work as I'm sick of seeing the .01 return. But, so far structured products don't sound like the best place to park it.
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11-14-2017, 12:23 PM
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#6
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,362
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Quote:
Originally Posted by beeboy
I'm sick of seeing the .01 return.
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If that's all you want, it's easy to open an online savings account that gets 1.25% with complete safety and liquidity.
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I thought growing old would take longer.
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11-14-2017, 12:28 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Oct 2017
Location: Tellico Village
Posts: 2,622
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Quote:
Originally Posted by braumeister
If that's all you want, it's easy to open an online savings account that gets 1.25% with complete safety and liquidity.
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I also stash cash in a short term investment grade bond fund. Pays about 2.25% with minimum principle risk.
VW
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11-14-2017, 12:36 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Jun 2017
Location: Western NC
Posts: 4,633
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Quote:
Originally Posted by vanwinkle
i also stash cash in a short term investment grade bond fund. Pays about 2.25% with minimum principle risk.
Vw
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vcsh ?
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11-14-2017, 12:37 PM
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#9
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Recycles dryer sheets
Join Date: Jul 2017
Posts: 54
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Quote:
Originally Posted by braumeister
If that's all you want, it's easy to open an online savings account that gets 1.25% with complete safety and liquidity.
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I'd like a lot more than .01 or 1.25%. Although don't we all.
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11-14-2017, 12:40 PM
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#10
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Recycles dryer sheets
Join Date: Jul 2017
Posts: 54
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Quote:
Originally Posted by VanWinkle
I also stash cash in a short term investment grade bond fund. Pays about 2.25% with minimum principle risk.
VW
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Not bad.
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11-14-2017, 01:07 PM
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#11
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Recycles dryer sheets
Join Date: May 2015
Posts: 114
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I have several structured notes in my portfolio. Some make sense / some don't - you need to see how they fit in your portfolio. One of my current notes is linked to the Euro Stoxx 50. 15 month term......if the Euro 50 is up - I get the greater of 24.75% or the return of the market......if the Euro 50 is flat to down 10% - I get par......if the market is down greater than 10% - there is no protection, my losses are equal to the market. In all markets, this note is better than owning the actual index.
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11-14-2017, 01:15 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,351
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Quote:
Originally Posted by OnTheBeach
... In all markets, this note is better than owning the actual index.
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That appears to violate the TANSTAAFL rule. Who is your counterparty and why would they be willing to do such a deal? Are you sure you've read all the fine print?
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11-14-2017, 01:17 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 3,020
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I had a Structured CD once from my local bank guy. It was FDIC insured so I couldn't loose money, which was my concern for that part of my investments at the time. I read the full prospectus thoroughly and had to explain to the sales guy (a.k.a. investment person) exactly what it guaranteed and how it worked. He wasn't up to speed on it. it must have been something he was told to push.
At the time I invested, coming out of the 2008 lows, I expected it to do very well no matter what. Heck, it couldn't go much lower. And I was guaranteed not to loose a single penny. Well, some parts of it did good and others did more than equally bad leaving me with less than I had in it. Due to the FDIC, I ended up getting exactly what I had started with. I will not do this again!
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11-14-2017, 01:30 PM
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#14
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gone traveling
Join Date: Oct 2016
Posts: 255
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I have a couple years of cash in laddered 2-year CDs. I just renewed one today at 1.8% APY. Not a bad rate, the money is guaranteed, and I can go to these if a period comes when I don't want to touch anything in the rest of my portfolio.
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11-14-2017, 01:33 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Oct 2017
Location: Tellico Village
Posts: 2,622
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Quote:
Originally Posted by ncbill
vcsh ?
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VSCSX and VFSUX are the 2 Vanguard funds I use.
VW
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11-14-2017, 01:36 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Oct 2017
Location: Tellico Village
Posts: 2,622
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Quote:
Originally Posted by Curmudgeon
I have a couple years of cash in laddered 2-year CDs. I just renewed one today at 1.8% APY. Not a bad rate, the money is guaranteed, and I can go to these if a period comes when I don't want to touch anything in the rest of my portfolio.
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+1 A great way to guarantee principle at a decent rate.
VW
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11-14-2017, 03:21 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2015
Location: Michigan
Posts: 5,003
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Quote:
Originally Posted by gcgang
My understanding is Structured Notes are a wonderful source of profit for the financial services industry.
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+1
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11-14-2017, 11:41 PM
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#18
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Recycles dryer sheets
Join Date: Jul 2017
Location: Seattle
Posts: 81
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Quote:
Originally Posted by beeboy
Hi everyone. Does anyone have any insight, opinions on structured notes. I'm thinking about purchasing a few of these products - one tied to the Euro Stoxx 50 and the other to the Russell 2000 that are offered through Citibank. Thanks in advance!
-bee
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I had a couple about 10 years ago. Both tied to european indexes with "downside protection"
One lost money and the downside protection meant I got my capital back (so an effective loss)
One returned a decent amount but on the whole it feels to me like gambling and I don't plan to use them in future
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11-22-2017, 07:23 AM
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#19
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Recycles dryer sheets
Join Date: Jul 2017
Posts: 54
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Quote:
Originally Posted by OnTheBeach
I have several structured notes in my portfolio. Some make sense / some don't - you need to see how they fit in your portfolio. One of my current notes is linked to the Euro Stoxx 50. 15 month term......if the Euro 50 is up - I get the greater of 24.75% or the return of the market......if the Euro 50 is flat to down 10% - I get par......if the market is down greater than 10% - there is no protection, my losses are equal to the market. In all markets, this note is better than owning the actual index.
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This is actually similar to the one they are trying to sell me. Linked to Euro Stoxx, but with a 70% limit on the upside, 20% protection on the down side. So, it sounds like you are happy with it. Thanks for the advice.
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11-22-2017, 07:34 AM
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#20
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Recycles dryer sheets
Join Date: Jul 2017
Posts: 54
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Quote:
Originally Posted by limeyx
I had a couple about 10 years ago. Both tied to european indexes with "downside protection"
One lost money and the downside protection meant I got my capital back (so an effective loss)
One returned a decent amount but on the whole it feels to me like gambling and I don't plan to use them in future
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Isn’t investing in the stock market a little like gambling? :-) I hear you though, certainly not sold on them and after reading most of these comments, I certainly am not putting as much as they want me to put in them. Maybe test it out with a smaller investment.
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