Just ask the poor UBS clients who were sold Lehman Bros. principal protected notes.
Principal protected notes are one common type of structured product.
Combining derivatives with high-yield notes had gotten untold numbers of investors into trouble, especially those who invested in Lehman principal protected notes, which went belly up and left investors holding the bag.
The most high-profile case has been Lehman principal-protected notes, which were sold as high-yield bonds.
Another batch of can't-lose stock investments came in 1992, when commercial banks sold equity-linked, principal-protected certificates of deposit.
There are two more twists to principal-protected notes that investors need to understand: First, they're unsecured obligations of the banks that issue them.
Some states offer prepaid tuition plans with guaranteed or principal-protected options.
Unlike principal-protected notes, these offer no protection if stocks sink.
This note has a term of six years, is principal-protected, and the return is linked to the value of a global index basket made up of the Dow, the Nikkei, and the Euro Stoxx 50.
The trust can distribute income to beneficiaries (who will pay income tax on these distributions of income), but principal is preserved, asset-protected and grows tax-free.
Finally, you could buy Treasury Inflation-Protected Securities (TIPS) whose principal and interest payments adjust with inflation.
Even in the poorer parts of the world, people will increasingly have to pay their own way. (In fact, a far higher proportion of health spending already comes directly out of patients' pockets in poor countries than in rich ones.) And the drug companies, their discoveries safely protected by patents, are the principal source of innovation in modern medicine.
TIPS, that is Treasury Inflation Protected Securities, offer fixed annual interest payments, but with TIPS the final repayment of principal varies with the Consumer Price Index.
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