Principal Protected Notes are notes issued by an investment banking firm with return partially tied to the performance of an equity index, such as Standard and Poor's 500. The senior's loan (investment) to the investment banking firm is not backed by a government guarantee.
Sellers of the Principal Protected Note typically target fixed income investors, seeking a steady source of income, while guarding against loss of the principal. Seniors who are scared of outliving their money and seeking a safe, better paying alternative than CD's (certificates of deposit) are being sought out.
How money is made by the investment banking firm on the seniors loan (investment) is a very complex process. Notes will define index levels that cannot be exceeded during the holding period in order to earn money above the inital investment (loan). The complexity of this financial structure includes the payment of commissions back to the banking investment firm.
The most evident risk of financial loss is through the potential for the investment banking firm (guaranteeing entity) to fail. Large investment banking firms selling Principal Protected Notes have reached the level of being traded on the NYSE New York Stock Exchange and failed. The investment firm goes bust, and the seniors money is lost.
Home Care Path www.homecarepath.com encourages seniors to know the vehicle of investment well before submitting their money.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment