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Retired in NYC
Guest
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 Posted:
Sat Oct 22, 2005 12:01 am Post subject:
Stocks with No Risk ? |
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Hello,
I'm looking for anyone who has had experience with "structured
products" (aka index linked notes)?
I read about them at these two web sites:
http://www.protectedstocks.com/
http://members.aol.com/rtorgerson/ILN.htm
I'm retired and looking for conservative investments.
If anyone out there has ever bought one of these animals, I'd love to
hear about your experience.
Thank You,
Tom (retired Roosevelt Island, NYC)
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Elle
Guest
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| Posted:
Sat Oct 22, 2005 12:01 am Post subject:
Re: Stocks with No Risk ? |
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"Retired in NYC" <retiredinvestor2255@yahoo.com> wrote
Do you have a portfolio allocation plan?
Do you know what kind of return you need from your investments?
| Quote: | If anyone out there has ever bought one of these animals, I'd love to
hear about your experience.
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Seems similar to an annuity: The customer ultimately pays for a return no
better than he/she could do by him/herself, and quite possibly worse, since
the fees tend to drive down the return. |
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Bucky
Guest
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| Posted:
Sat Oct 22, 2005 12:01 am Post subject:
Re: Stocks with No Risk ? |
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Retired in NYC wrote:
| Quote: | I'm looking for anyone who has had experience with "structured
products" (aka index linked notes)?
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Interesting product. I looked into it, and the index linked notes are
definitely legitimate products issued by reputable firms. However,
these newsletter subscription sites tend to misrepresent and
exaggerate.
Here's an example of one issued by Merrill Lynch indexed to S&P500,
MTTX:
http://www.quantumonline.com/search.cfm?tickersymbol=MTTX&sopt=symbol
http://www.sec.gov/Archives/edgar/data/65100/000119312504148053/d424b2.htm
The newsletter claims that there is 100% upside participation. This is
impossible. You cannot get the same returns as the stock market with
zero risk. If there really was 100% upside participation, then the
market value would be far higher than $10. Take a closer look at the
SEC filing and you'll see that there is a 1.10% index adjustment factor
each year. There's a table that shows if the stock market gains 10.7%
per year, this note will only return 7.43% per year.
Here are the negative considerations about these products:
** Indexed to stock price, you lose out on dividends.
** Zero risk is not true. If you only get your par back, you'll have
missed out on interest payments had you simply put in a CD. A 4% CD
over 7 years returns 30%!
** You're not going to get 100% upside, don't believe the newsletters,
read the prospectus.
** Extremely low-volume and illiquid. Only about 1 trade per week.
** Backed only by the issuing firm. If that one firm goes down, you can
kiss the note goodbye. Compare to holding a actual equity index, if one
firm goes down, won't have much of an effect.
** Durations typically 5-7 years, pretty unlikely for S&P 500 index to
be down over that span.
All this said, there could still be a time and place for these kind of
products. Just do your homework and don't believe the hype. There's
always a tradeoff.
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Don
Guest
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| Posted:
Sat Oct 22, 2005 12:02 am Post subject:
Re: Stocks with No Risk ? |
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"Retired in NYC" <retiredinvestor2255@yahoo.com> wrote in message
news:1129924329.168140.260600@g43g2000cwa.googlegroups.com...
Periods of low interest rates are especially dangerous for retired people.
Scamsters dream up all kinds of financial products that promise higher
yields, and people badly needing more income take the bait. The truth about
all these products, including the legitimate or semi-legitimate ones that
are not, legally, actual fraud, is always the same: Along with higher
possible yield goes higher risk. In these periods of low yield from
conventional investments, retired people need to face facts, protect
themselves from temptation, and accept the reality that there is no such
thing as high yield without high risk. |
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Ed
Guest
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Sat Oct 22, 2005 12:02 am Post subject:
Re: Stocks with No Risk ? |
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I wouldn't touch one. Never owned one, never will.
If you want conservative look at preferreds. Most of them have a call price
of $25. They are rated by Moody's and S&P. If you can find one selling below
$25 with a high rating and a great yield, go for it.
http://www.quantumonline.com/Index.cfm
Register, it's free. |
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