Share This Episode
Planning Matters Radio Peter Richon Logo

These Are Some Structured Notes For Retirement

Planning Matters Radio / Peter Richon
The Truth Network Radio
January 7, 2023 9:00 am

These Are Some Structured Notes For Retirement

Planning Matters Radio / Peter Richon

On-Demand Podcasts NEW!

This broadcaster has 152 podcast archives available on-demand.

Broadcaster's Links

Keep up-to-date with this broadcaster on social media and their website.

January 7, 2023 9:00 am

2022 was a tough year for investors, and a lot of us may not realize there are strategies that a lot of the pros utilize, which are great complements to traditional #stocks and #bonds. As Peter with Richon Planning explains to Erin Kennedy, Structured Notes offer a unique source of risk and return.

Peter and Erin break down the three types of Structured Notes, including: -Principal Protected -#Income -Growth

We know the Fed will continue to raise rates in 2023, which will affect the value of bonds. Now is a great time to consider complementing your portfolio with notes that can add protection or create income. To learn more, please reach out to Peter by calling (919)300-5886 or by visiting

#StructuredNotes #BondAlternatives #CreateIncome


Hey Peter, really good to see you. Today we are talking about a smart alternative to high-yield bonds. 2022 was a very tough year for investors, and a lot of us may not realize that there are strategies that a lot of the pros utilize, which are great complements to traditional stocks and bonds.

Which have a unique source of risk and return. So what is a structured note? Well it is an alternative type of investment that a lot of people are not even aware exists. A lot of people probably have never heard of structured notes. And I think that because of the market environment, a lot of people should begin to explore what are structured notes. I think that they make for a very valuable component of an asset allocation and portfolio mix. So we're using a lot of them in combination with to complement or in some cases substitute and replace the bond or fixed income portion of a portfolio because 2022, a very rough year for bonds and fixed income because of the interest rate increases.

In 2023 they are saying they are going to continue with the interest rate increases. So in order to get a reasonable yield or income or growth or in some cases principal protection, structured notes can do a few different things. I think we'll talk about the different types in just a second, but at its core it is a loan. A bond is not an investment per se, it is a loan to an entity. And municipalities and corporations need to raise capital so they issue bonds to have investors loan them money for a temporary period of time and then give those investors a stated rate of return.

When interest rates rise, bond values can go down. And so a structured note has a bond core and then it's got some derivative attached to it. And derivatives are a fancy word that a lot of people have probably heard of the derivatives market, but never venture to stick their toe in the water. Here's the great thing about structured notes is that you don't have to understand completely derivatives or be very well versed. You've got the structured note that a financial entity institution generally are the ones issuing these has created.

They're worrying about the derivatives. You've got certain parameters for a defined outcome of expectations with your structured note. That's why they're called structured notice. You've got some definition of structure of what the outcome is going to be. Okay, so you did mention there are three kinds. We're going to break them down one by one. And the first I want to talk about is principal protected because, Peter, this is a great way to participate in the upside of a market without taking any risk.

Yeah. And again, there's some different structures. A lot of these have different time length commitments.

So anything from maybe 13 months to two years to five years. But as the name indicates, principal protected, there is not a risk of loss of principal due to downward moving markets. And there is the ability to capture gains if the markets rise over that given time period of commitment. So based on the length of time that you are making that deposit, purchasing that structured note for that upside that you capture generally linked to a market index. For instance, I'm seeing some that capture 100% of the upside of the S&P up to a certain level with no downside risk. And how much of that capture is going to depend on the time length and some attached to different indices. But the ability for that upside potential without any downside risk of loss of principal is a pretty attractive deal for many specifically risk adverse investors.

All right. So as we take a look at where these notes fall on the spectrum of risk and return in the middle here, Peter, we have income notes. Who are these for? Yeah, if you are looking for more conservative accumulation, maybe a little higher yield than what bonds are paying, or if you are a retiree seeking cash flow from your portfolio, I think income notes can be a great complement. And there might be some risk, as you showed on that chart, there's kind of an increasing level and spectrum of risk. These are not necessarily principal protected notes. Again, there's many different types of notes, like there's many different types of stocks, like there's many different types of mutual funds or bonds. Notes have different varieties. So these income notes generally give us a hedge against market losses and in many cases is a very healthy hedge where you may not experience any loss, even if the market is down 25 percent or more in certain cases, and they are paying out a stated yield or interest rate.

Many of these pay that interest on a monthly basis. So if you are looking to create cash flow, maybe this is a good substitute for bond funds or complement to a dividend stock portfolio. Again, maybe a more conservative risk adverse investor, but somebody who is willing to take a little bit of risk here might find the income notes a little bit more attractive to create that cash flow than the principal protected notes, where you've got to wait till the end to see what your results are going to be.

And there's not necessarily a guarantee to make any gains if the market's down with the principal protected notes. Right. So it is what is our goal? We've got to define that. Do we want an income or do we just want safe opportunity? That would be the difference between those two styles. And then on the other end of that, though, is, of course, the growth note.

Explain who these are for. Yeah, I mean, again, increasing acceptance of the potential for risk, otherwise known as risk tolerance. Growth notes have a little bit more potential for fluctuation in value, maybe not as great of a hedge, but they are designed to participate in more of the upside of the market, given the acceptance of a little bit more potential for downside or less of a hedge against it. So they can accommodate a little bit more bullish investors, ones that do have some level of risk tolerance are not completely conservative, but again, have some definition for the potential of outcome. Structured note structure is very appealing. The fact that we can take at least a piece of money and know what our range of possibilities in the end of the investment is going to be is something that a lot of investors do appreciate.

Very appealing. Yeah. And as I mentioned at the beginning of our video here, it has been a very tough and volatile year for investors. The market has lost about 15% of its value so far. So as we know that the Fed is going to continue raising rates, which affects the value of bonds, who should be considering structured notes? Is this for our lazy money? Is it to add protection?

Or is it to create income? Yeah, all of the above. It really is an all of the above answer. I am looking at structured notes more and more as that bond and fixed income complement or substitute. And there are a few other options that kind of fit that description as well. But for more conservative, risk adverse, income seeking investors, and even some that want some growth and appreciation, I think that the potential for risk and low interest rates that's still prevalent across many bond and fixed income portfolios is less than desirable. And the structured notes makes a more attractive piece there that does give us some ability for reasonable expectations for decent returns, where it's been a challenging year to find those. And by the way, Aaron, I do have to speak to my registered investment advisory firm, Brookstone Capital Management. They are sort of the back office behind a lot of what we do. They have negotiating power with the volume of investment that they can make. It's like a fraternal organization of independent advisors across the country, but they have the pooled resources and they can negotiate, because of that, better, more attractive terms on many of these structured notes than somebody might be able to find elsewhere.

So just because you haven't heard your broker, advisor or bank talk about structured notes doesn't mean that they are not out there and available if you were to ask them about them. But what I am often finding is that we are able to secure a more optimal range of outcomes, better terms and rates on these because of that negotiating and purchasing power associated with Brookstone Capital Management. So my hat's off to them and the team there. Right. Well, I think it's always worth reminding people who are watching that you are a small business owner, but you are backed by this team of investment experts who gives you access to these unique products.

So that's just an important reminder. But if somebody is interested in figuring out how structured notes can complement their portfolio, Peter, what's the best way to reach you? Give us a call. Nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six.

Rates on these, by the way, are really attractive when you drill down into them and take a look, as well as what the return of principal value has been over the course of history is pretty astounding. And so I encourage anyone that would like to find out where there may be alternative options, where you might be able to better determine your outcome for for a more predictable projection into the future of of where you are now and where you want to end up being to take a look at structured notes. Give us a call.

Nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six. You can also email me, Peter, at Rishan planning dot com. Visit the website Rishan planning dot com. It looks like rich on planning dot com. All right, Peter, thank you very much. Always a pleasure.

Thank you. This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment tax or legal advice from an independent professional adviser. Any investments and or investment strategies mentioned involve risk, including the possible loss of principal advisory services offered through Brooks own capital management, a registered investment adviser. The fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission, which may result in a conflict of interest regarding compensation.
Whisper: medium.en / 2023-01-08 03:38:08 / 2023-01-08 03:42:30 / 4

Get The Truth Mobile App and Listen to your Favorite Station Anytime