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The financial landscape is continuously evolving and with these changes come new
investment opportunities. From conservative to aggressive, structured products
can complement diversified portfolios by providing efficient market exposure
and risk/return profiles formerly available only to institutions and high net
worth investors. Structured products give investors the opportunity to take
advantage of individual market views and capitalize on perceived market trends
to achieve desired economic benefits.
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Structured products are innovative instruments whose payoff is derived from the
performance of an underlying asset such as an equity, index, foreign exchange,
commodity, or hybrid. Designed to meet specific investment objectives such as
principal protection or income, structured products generally combine a debt
security with a derivative component.
Structured products are a diversification tool that can help mitigate portfolio
risk by controlling volatility and focusing on financial goals. With a wide
range of complexities and objectives, structured products allow investors the
potential to capitalize on a market view, whether bullish or bearish, and
achieve desired investment results. Structured products can be designed to help
investors meet one or a combination of investment objectives.
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Structured products are among the fastest growing segments of the financial
services industry. Formerly available only to larger institutions and high net
worth investors, these products gained market acceptance in the early 1980s and
were quickly embraced by foreign markets. However, recent market fluctuations
have forced many U.S. investors to reexamine their portfolio allocation
strategies. As a result, structured products have grown in popularity among
private investors looking to control portfolio volatility by utilizing
risk/return profiles and income scenarios not readily available through
traditional investments.
As structured investments become more mainstream, it is important that investors
are fully aware of the associated risks and whether these securities fit within
their investment parameters. Investors should carefully consider their
investment objectives prior to investing, such as:
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Time horizon
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Risk tolerance
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Income requirements
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Market view (bullish, bearish, moderate outlook, etc.)
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Structured products are not suitable for all investors. Each
structured product can exhibit an entirely different set of characteristics,
risks rewards. Investors must understand the characteristics, risks and rewards
of each structured product as well as those of the referenced asset before making
a decision to invest in the security. Investors should carefully read the prospectus
and pricing supplement prior to investing which contains a detailed explanation of
the risks, tax treatment, and other relevant information about the investment. Securities
offered through your financial professional and investors should consult their accounting,
legal or tax advisors before investing.
While structured products pay interest similar to debt securities, they often exhibit
very different profit and loss potential. The profit and loss potential of many structured
products is more akin to an option contract, particularly those where principal invested is
at risk from market movements in the underlying security. Depending on the objective of the
structured product, an investor may be exposed to the loss of part or all of their original
investment.
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