INSIGHT | ANDREW’S SEVEN LESSONS FROM INVESTING IN 2024
For many, 2024 was a tumultuous year, to say the least.To kick off the year we thought we would share Andrew’s Seven Lessons From Investing in 2024
Cashbox Global
Even in today’s unpredictable financial markets, you don’t need to choose between high returns or 100% protection — with Structured Notes you can weigh the potential rewards against the risks and choose what works for you. For income and growth investors, structured notes offer an appealing option, with both capital protection and market-linked returns. However, understanding the bigger picture is crucial for making informed investment choices.
In a recent episode of Thought Leadership Thursdays, the Cashbox team shared valuable insights on considerations when assessing structured notes. Here are five key takeaways from the session. If you find these helpful, you can check out the full episode here on YouTube.
Investment utopia is to achieve high returns with minimal risk. Structured Notes operate on a spectrum—ranging from 100% capital-protected and fixed income to conditional income or growth with varying levels of capital protection. The trick lies in balancing returns with your risk appetite.
Low-risk instruments like fixed deposits or money market funds may protect capital but often fail to keep up with inflation.
Higher-risk options, like direct equities, can offer better returns but with exposure to market fluctuations and risk capital.
A well-designed structured note aims to minimise risk while maximising the potential for higher returns —a valuable tool for cautious investors seeking more predictable income, growth, and capital protection.
Many investors jump straight to the fact sheet. Their first stop is to see the return, then the underlyings and the issuer. However, Cashbox Global suggests taking a step back and starting with the rationale. The rationale outlines the context and explains the investment thesis and how external market conditions may impact performance, both positive and negative.
Ask yourself: Does the story behind the note align with the trends and present an opportunity for positive growth?
How well does the built-in protection address potential risks?
The rationale provides Cashbox Global’s thinking, helping you assess whether the note fits your objectives and is appropriate given the broader environment.
Structured notes can be linked to broad market indices (like the FTSE 100 or S&P 500) or baskets of individual shares. Each option has distinct benefits and different risks:
Index-based notes offer wider diversification, reducing volatility by spreading risk across multiple companies. However, returns may be lower compared to a basket of individual stocks.
Stock basket notes carry higher potential returns but with greater exposure to individual company risks.
Matching the right underlying asset—whether an index or a stock basket—with your investment goals and risk tolerance is key to optimising performance.
No investment exists in isolation, and understanding the macro environment is essential when evaluating structured notes. The team highlighted several factors that investors need to consider, including:
Interest rates and inflation: These directly influence market performance and can impact the returns of structured notes.
Geopolitical developments: Conflicts or elections can affect markets in unpredictable ways, adding additional considerations.
Keeping an eye on macro tailwinds and headwinds and the level of protection built into a structured note allows investors to better position themselves for long-term success.
Structured notes often provide capital protection and other features to support achieving the successful performance of a note even if markets decline. For instance, a note tied to the S&P 500 might offer 35% downside protection, meaning you will receive your full capital back at maturity as long as the index doesn’t fall by more than 35% of its start price by the end of the term.
Fixed Income-based notes offer regular returns, regardless of market movements.
Capital Protected Growth-based notes guarantee your capital at maturity, and defer income but offer higher potential returns if certain performance conditions are met.
Conditional Income or Growth notes offer higher regular returns, subject to periodical specified conditions being met.
Evaluating whether the protection offered matches your risk tolerance is a critical step in deciding whether the note suits your investment strategy.
Structured notes can complement any portfolio, from conservative to growth-oriented. For investors, they provide an appealing alternative to low-yield cash instruments or bonds.
By incorporating these instruments into a portfolio, you can achieve a more balanced, risk-managed, diversified investment strategy tailored to your objectives.
To explore these insights further, watch the full episode on YouTube. The session covers everything from understanding the different indices to how macro trends shape structured notes—and much more.
🎥 Watch: Five Important Considerations When Assessing a Structured Note
Find this article insightful? Don’t Miss Part 2 of Beyond the Fact Sheet: Five Important Considerations When Assessing Individual Stock Structured Notes.
Each month, Cashbox Global hosts TLT (Thought Leadership Thursdays), a 45-minute online session focused on topics that investors should know. We invite guest speakers to share their knowledge and insights with our community.
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Structured notes bridge the gap between capital protection and market-linked returns, making them an excellent tool for investors seeking predictable income in uncertain markets. By starting with the investment rationale, evaluating macro trends, and assessing built-in protections, you can confidently introduce structured notes into your portfolio bringing predictability and protection.
Have thoughts or questions? Feel free to share in the comments, or connect with us directly for a deeper discussion!
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