Market-linked income notes may offer investors a solution to the low bond yields currently available. These notes are issued by financial institutions and pay a relatively high contingent yield based upon the performance of one or more underlying stock market indices.
These notes provide the potential for high yields in both increasing and decreasing stock markets. They may also miss one or more prescribed interest payments depending upon the performance of certain underlying market indices. While offering a measure of downside protection in a declining market, they may also expose an investor to a loss of principal should one of the underlying indices have a decline of 30% or more on the day of maturity.
Please contact your advisor to better understand how we construct an allocation of these income notes to mitigate their risks and provide a competitive alternative to a portion of assets that would otherwise be invested in more conventional bond investments.