A structured note is an investment where the return is defined by some underlying index or measurement and that return is delivered at a defined date in the future. For example, an investor might agree to a five year contract with a bank. The investor gives the bank a sum of money, and the money is entered into a stock market index. After five years, if the stock market index has gone up, the investor is returned their original sum of money plus the gain in the stock market index. After five years, if the stock market index has gone down, the bank still returns the full amount of money that the investor originally invested.
It is important to note that this may only apply to a certain threshold. For example, a bank may set a threshold of 35%. If at the end of the bank’s contract with the investor, the stock market index which the money was entered into falls below 35%, the bank does not have to return the full amount of money that the investor originally invested. Instead, the investor gets paid an amount proportional to the drop in value of the stock market index.
None of these specific investment classes are recommended by durableincome.com, however, better understanding of them will help you prepare for a more secure retirement. Discuss each asset class or particular investment carefully with your financial advisor before making any investment decision.