chinaco
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Feb 14, 2007
- Messages
- 5,072
Based on comment in another post I began looking more closely are Equity Linked Notes, and other Structured products. These products have fairly complex terms and tend to be a combination of futures, options, bonds, etc.... THe actual makeup depends on the product.
They sell on the AMEX or NYSE (maybe others). They seem to be thinly traded and often trade at a premium or discount.
It seems that the popularity of these investments are increasing amoung individual investors. However, they seem fairly complex. Understanding the stated benefits of some of these notes seems straight forward, however understanding the downside (or traps) is a little more fuzzy.
It seems to me that these things appeal to people attempting to limit the downside.
It has occurred to me that one is doing the reverse of diversification when they buy these notes. The investment is usually offered by a bank. If the bank has problems, everthing in the investment is tied to that one company. Where as a mutual fund is spread across multiple companies. In other words, if a bank over extend too much, those notes could be at risk. It seems that these banks limit their risk exposure (size of the note offering), however as these things get more popular, some could get caught in a squeeze.
Do you use these products? What do you thin good idea or bad idea?
They sell on the AMEX or NYSE (maybe others). They seem to be thinly traded and often trade at a premium or discount.
It seems that the popularity of these investments are increasing amoung individual investors. However, they seem fairly complex. Understanding the stated benefits of some of these notes seems straight forward, however understanding the downside (or traps) is a little more fuzzy.
It seems to me that these things appeal to people attempting to limit the downside.
It has occurred to me that one is doing the reverse of diversification when they buy these notes. The investment is usually offered by a bank. If the bank has problems, everthing in the investment is tied to that one company. Where as a mutual fund is spread across multiple companies. In other words, if a bank over extend too much, those notes could be at risk. It seems that these banks limit their risk exposure (size of the note offering), however as these things get more popular, some could get caught in a squeeze.
Do you use these products? What do you thin good idea or bad idea?